rses32072quizzes281250take Question 24 0 pts The interest ex

rses/32072/quizzes/281250/take Question 24 0 pts The interest expense recorded on an interest payment date is less than the cash interest paid only if the company is amortizing a discount on bonds payable. e only if the bonds were sold at face value. only if the company is amortizing a premium on bonds payable. e only if the market rate of interest is less than the stated rate of interest on that date. Question 25 0 pts The interest expense recorded on an interest payment date is less than the cash interest paid

Solution

24.

Answer: 3^rd option

If the bonds issued at premium, the amount of premium is amortized through periodic interest expense; this is the reason why interest expense being lower than the cash interest payment.

All the other options are not correct:

1^st option: In case of discount, the amount of discount is amortized by crediting; it makes lower cash payment but higher the amount of interest expense.

2^nd option: Issuing bond at par makes the same amount of cash payment and interest expense.

4^th option: If the market rate is lower than the stated interest rate, the bonds should be issued at premium; but this is the decision of the management if it is issued at premium or not. Therefore, there is no certainty.