When a Bond Payable Is Issued at a Discount,subsequent Amortization

question 101

Multiple Choice

When a bond payable is issued at a discount,subsequent amortization of the discount doesn't do which of the following?

• A)Increase interest expense.
• B)Increase the book value of the bonds.
• C)Increase in amount amortized for each year the bond gets older when the effective-interest method is used.
• D)Increase the amount reported as a cash flow from operating activities.

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Definitions:

Unsatisfied Judgment

A legal judgment that has not been fully paid or settled by the debtor.

Insolvent

The state of being unable to pay debts when they are due, often leading to bankruptcy proceedings.

Dissolution

The process of legally terminating the existence of a corporation, partnership, or other legal entity.

Creditors

Creditors are individuals or institutions that lend money or extend credit to others, holding the right to receive payment for debts owed to them.