Amortizing a Bond Discount

question 103

Multiple Choice

Amortizing a bond discount:

• A)Allocates a part of the total discount to each interest period.
• B)Increases the market value of the Bonds Payable.
• C)Decreases the Bonds Payable account.
• D)Decreases interest expense each period.
• E)Increases cash flows from the bond.

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Definitions:

Investment

An asset or item acquired with the goal of generating income or appreciation in value.

Outstanding Balance

The amount of money owed on a loan or credit line that remains to be paid off.

Annual Installments

Payments made once a year, often referring to the repayment schedule of a loan or similar financial obligation.

Equal Payments

Periodic payments of the same amount over the tenure of a loan or mortgage, covering both principal and interest.