A corporation issues fro cash 1000000 of 10 20-year bonds

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Reference no: EM13592317

A corporation issues fro cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time whenthe market rate of interest is 12%. The interest method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

a. The amount of the annual interest expense is computed at 10% of the boud carrying amount at the beginning of the year.

b. The amount of the annual interest expense gradually decreases over the life of the bonds.

c. The amount of the unamortized discount decreases from its balance at the issuance date to a zero balance at the maturity date.

d. The amount of the unamortized premium decreases from its balance at the issuance date to a zero balance at the maturity date.

e. The price of the bonds is equal to the sum of interest payments and face amounts of the bonds.

Reference no: EM13592317

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