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No, the total amount of interest expense reported over the life of the bonds will not be the same if the bonds are issued at par, premium, or discount. When bonds are issued at a premium, the effective interest expense is lower than the nominal interest payments, whereas, for bonds issued at a discount, the effective interest expense is higher than the nominal payments. Thus, the total interest expense recognized will differ based on the issuance price relative to par value.
What else can I help you with?
True or false A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate?
True
Is the total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount or minus the total premium related to the bond?
Yes, the total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount (if the bond is issued at a discount) or minus the total premium (if the bond is issued at a premium). This accounts for the effective cost of borrowing, reflecting both the cash flows from interest payments and the adjustments for the bond's initial issuance price relative to its face value.
Where does interest expense in the income statement?
Interest expense is shown at debit side of income statement because it is an expense for business.
Unused fees on credit line should be operating expenses or interest expense?
Interest Expense
Can you deduct credit card interest as a business expense?
No, credit card interest cannot be deducted as a business expense.
Accounting treatment of trade discount and cash discount?
Trade Discount are considered cost of sales/reduction in sales dependant upon who the customer is. Cash Discount is always considered Increasing Interest Expense/Reduction of Interest Expense, dependant upon who the recipient is.
Is the straight-line amortization or effective interest rate method better?
This method is preferred over the straight-line method of amortizing bond discount or bond premium. Amortization of a bond discount or premium is the difference between the interest expense and the nominal interest payment. The amortization entry is: Interest Expense (effective interest rate x carrying value) Cash (nominal interest rate x face value) Bond Discount (for the difference)
Are credit card discounts reported as operating expenses on an income statement?
a credit card discount would be a credit, not an expense.
True or false A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate?
True
What is the difference between dividends and interest expense?
Interest Expense is usually calculated by (Carrying Value of Liability*Yield Rate * Time). Carrying Value is the actual present value of the liability (including discounts earned, etc) Interest Expense is the money that actually goes out of the firm. Interest Paid is calculated by (Face Value of Liability*Interest Rate * Time). Interest Paid is the fair-value of dues from the firm, but is not the actual value of the liability. Interest Expense is the amount reflected in the books of the firm, and is usually higher than Interest Paid. This is because Interest Expense often includes the cost of discount amortization(this is necessary when the bond/other liability was gained at a discount. The amortization is worked into the formula above, and hence gives an amount higher than interest paid. This gives the total interest expensed by the Company.) Hope this helps. Cheers
Is the total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount or minus the total premium related to the bond?
Yes, the total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount (if the bond is issued at a discount) or minus the total premium (if the bond is issued at a premium). This accounts for the effective cost of borrowing, reflecting both the cash flows from interest payments and the adjustments for the bond's initial issuance price relative to its face value.
In which manner is expense data usually reported?
Expense data is usually reported with expense reporting software. The actual setup depends on the company and the type of expense data being collected.
What journal entry accrues interest expense?
DR - Interest Expense CR - Interest Payable
What type of an account is a purchase discount?
contra-expense It's an expense, not a contra expense. If you don't pay the bill within the discount period, and you had recorded the original purchase at net (Purchase price less the early pay discount) then you have more expense, not less, when you don't pay on time.
Is interest expense a selling or general and administrative expense?
Interest expense is neither selling or administrative, and it's too significant to be called a general expense. Interest expense is usually called a finance expense and is usually listed separately from SG&A, on the Income Statement
Where does interest expense in the income statement?
Interest expense is shown at debit side of income statement because it is an expense for business.
What is the journal entry to record accrued interest expense?
Debit Accrued Interest Expense Credit Accrued Interest Payable
