Which of the Following Statements About a 10-Year Bond Issued

question 226

Multiple Choice

Which of the following statements about a 10-year bond issued at a discount is not correct?

• A)At the end of ten years,the balance in the Discount on Bonds Payable account will equal zero.
• B)At the end of ten years,the carrying value will equal the face value.
• C)At the end of ten years,the total interest expense will reflect the market rate of interest.
• D)At the end of ten years,the total interest expense will equal the total interest paid.

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Definitions:

Payback Period

The length of time it takes for an investment to recover its initial cost, used in capital budgeting to assess investment viability.

After-Tax Net Income

The amount of profit a company has left after paying all its taxes.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, simplifying financial calculations.

Salvage Value

The envisaged monetary value of an asset when sold after its lifespan of utility.