What is effect of failure to record discount amortization

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Problem 1: An entity neglected to amortize the discount on outstanding ten-year bonds payable. What is the effect of the failure to record discount amortization on interest expense and bond carrying value, respectively?

a. Understate and understate

b. Overstate and overstate

c. Understate and overstate

d. Overstate and understate

Problem 2: Legal fees and registration fees associated with the issuance of bonds are:

a. Expensed during the period in which the bonds are issued.

b. Amortized to interest expense over the life of the bonds using the straight-line method.

c. Amortized to interest expense over the life of the bonds using the effective interest method.

d. Amortized over a period not to exceed five years.

Reference no: EM132817152

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