Asked by Daniel Amoako on May 28, 2024
Verified
Discount on bonds is an additional cost of borrowing and should be recorded as interest expense over the life of the bonds.
Interest Expense
Interest expense is the cost incurred by an entity for borrowed funds, reflected on the income statement as part of the cost of financing debt.
Discount On Bonds
The amount by which a bond is sold below its face value.
- Understand the procedures for accounting for bonds issued at a premium, discount, or face value and the subsequent recording of interest expenses.
Verified Answer
MH
Maggie HartleyMay 30, 2024
Final Answer :
True
Explanation :
Discount on bonds represents the difference between the face value of a bond and the amount paid for it. This discount is an additional cost of borrowing and should be recorded as interest expense over the life of the bonds using the effective interest method. Therefore, the answer is true.
Learning Objectives
- Understand the procedures for accounting for bonds issued at a premium, discount, or face value and the subsequent recording of interest expenses.
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