When the Straight-Line Method of Amortization Is Used for a Bond

question 104

Multiple Choice

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

• A)adding the amount of discount amortized for that period to the amount of cash paid for interest during the period.
• B)subtracting the amount of discount amortized for that period from the amount of cash paid for interest during the period.
• C)multiplying the face value of the bonds by the stated interest rate.
• D)multiplying the face value of the bonds by the market interest rate.

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Definitions:

Product Cost

Refers to the total expenses incurred to manufacture a product, including direct labor, direct materials, and manufacturing overhead.

Checkout Clerk

An employee who is responsible for handling the final processing of transactions at the checkout counter of a retail store, including customer payment and bagging of items.

Selling Expense

Expenses directly related to the selling of products or services, such as advertising, sales commissions, and promotional materials.

Period Cost

Expenses that are not directly tied to the production process and are expensed in the period in which they are incurred, such as selling and administrative expenses.