Interest Expense Is Computed Annually When a Bond Is Issued

question 133

Multiple Choice

Interest expense is computed annually when a bond is issued for other than its face value.For a bond issued at a premium, how will this component change as the bond approaches maturity?

• A) decrease
• B) increase
• C) remain constant
• D) not enough information given to decide

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Definitions:

Prenumbered Voucher

A control mechanism used in accounting to ensure that all transactions are recorded and processed in a sequential manner, mitigating errors and fraud.

Expenditure

Money spent or cost incurred in an organization's efforts to generate revenue, representing the cost of doing business.

Bank Reconciliation

The process of comparing a company's bank account balance as reported by the bank with the company's own records and reconciling any differences.

Deposit in Transit

Funds that have been sent to a bank but not yet recorded on the bank's records, often seen in bank reconciliation statements.