A Company Issued Bonds When the Stated Rate of Interest

question 95

Multiple Choice

A company issued bonds when the stated rate of interest was 10% and the market rate was 10%.Which of the following statements is incorrect?

• A)The bonds were issued at par.
• B)Annual interest expense will equal the company's annual cash payments for interest.
• C)The book value of the bonds will decrease as cash interest payments are made.
• D)Annual interest expense is the same regardless of whether the effective- interest or straight-line method of amortization is used.