The Premium on Bonds Payable

question 20

Multiple Choice

The premium on bonds payable:

• A)increases interest expense on the income statement.
• B)reduces interest expense on the income statement.
• C)increases the amount of cash paid to bondholders over the stated rate of interest.
• D)decreases the amount of cash paid to bondholders over the stated rate of interest.

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Definitions:

Purchases

Items bought or acquired by a company for various purposes, primarily for resale in the course of business.

Cost Of Goods Available

The total cost of inventory available for sale during a period, calculated as beginning inventory plus purchases minus ending inventory.

Periodic Inventory System

An accounting method where inventory is physically counted at specific intervals to determine the level of inventory and cost of goods sold.

Perpetual Inventory System

An inventory accounting system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.