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There are certain patterns we should expect to see on a bond amortization table. Complete the...

Question:

There are certain patterns we should expect to see on a bond amortization table. Complete the following statements regarding these patterns.

a. Assuming a bond is issued at either a premium or a discount, the carrying value on the issuance date should be equal to the bond's:

b. Assuming a bond is issued at a discount, the cash interest payment calculated every period should:

c. Assuming a bond is issued at a discount, the carrying value over time should be:

d. Assuming a bond is issued at a discount, the interest expense amount calculated every period using the effective interest method should be:

e. Assuming a bond is issued at a premium, the carrying value over time should be:

f. Assuming a bond is issued at either a premium or a discount, the carrying value on the bond s maturity date, right before the final cash payment, should be equal to the bond's:

g. Assuming a bond is issued at a premium, the interest expense amount calculated every period using the effective interest method should be:

Bonds Payable:

Bonds are long-term debt instruments issued by businesses in order raise capital. Bonds are characterized by their principal values, which are to be repaid upon maturity, and their interest rates, which determine the interest to be paid on the principal. A bond's issuance price is determined by its interest rate in comparison to the market rate.

Answer and Explanation:

a. Assuming a bond is issued at either a premium or a discount, the carrying value on the issuance date should be equal to the bond's: principal value plus the premium or less the discount.
b. Assuming a bond is issued at a discount, the cash interest payment calculated every period should: remain the same, calculated by multiplying the face value of the bond by the bond's principal value
c. Assuming a bond is issued at a discount, the carrying value over time should be: increasing
d. Assuming a bond is issued at a discount, the interest expense amount calculated every period using the effective interest method should be: increasing, calculated by multiplying the carrying value of the bond by the market interest rate per period
e. Assuming a bond is issued at a premium, the carrying value over time should be: decreasing
f. Assuming a bond is issued at either a premium or a discount, the carrying value on the bond's maturity date, right before the final cash payment, should be equal to the bond's: principle value
g. Assuming a bond is issued at a premium, the interest expense amount calculated every period using the effective interest method should be: decreasing, calculated by multiplying the carrying value of the bond by the market interest rate per period

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Long-Term Debt: Definition, Cost & Formula

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