discounts and premiums on bonds payable wksht

If we recognized interest expense on the amount of interest we pay to the bondholder, our periodic interest expense would be ______ and our net income would be ______.

overstated, understated

when the market rate of interest is equal to the interest rate stated on the face of the bond, the bond will sell at

par value

A bond is issued at a _______ when the market rate of interest is less than the rate of interest that is stated on the face of the bond.

premium

When issued at a premium, the interest rate paid to the bondholder is based on the higher ______rate.

stated

The interest the issuing company pays the investor is based on the _______rate

stated (coupon, contractual)

_______ ensures that a portion of the discount is recognized as bond interest expense. (confirms matching principle)

amortization

Discount on bonds payable is a ______ account.

contra liability

For a premium, the amortization of a bond premium involves a periodic _____ to interest expense

credit

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a

discount

an issuing company _____ the expense over period and pays at the end of the term

incurs

The entire amount of the discount will be recognized as interest expense in the year the bond is ______.

issued