Which of the Following Statements Correctly Describes the Accounting for Bonds

question 94

Multiple Choice

Which of the following statements correctly describes the accounting for bonds that were issued at a premium?

• A) The interest expense over the life of the bond is less than the cash interest payments.
• B) The interest expense over the life of the bonds increases as the bonds mature when the effective interest method is used.
• C)The amortization of the premium on bonds payable account decreases as the bonds mature when the effective interest method is used.
• D)The book value of the bond liability increases when interest payments are made on the due dates when the effective interest method of amortization is useD.When bonds are issued at a premium, interest expense over the life of the bonds equals the total payments for interest minus the premium on bonds payable at the issue date.

Comprehend the relationship between sales, fixed costs, variable costs, and their impact on pretax income.

Calculate the break-even point in both units and sales dollars.

Utilize various methods (e.g., least-squares regression, high-low method) to estimate cost behavior and understand their applications.

Assess the impact of changes in fixed costs, variable costs, and selling price on the break-even point and contribution margin.

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