Reference no: EM132995715
Problem 1: The issue price of a bond is equal to the present value of the future cash flows for interest and principal when the bond is issued
a. Yes - At face amount, No - At a discount, Yes - At a premium
b. Yes - At face amount, No - At a discount, No - At a premium
c. No - At face amount, Yes - At a discount, Yes - At a premium
d. Yes - At face amount, Yes - At a discount, Yes - At a premium
Problem 2: Kenwood Co. neglected to amortize the premium on outstanding ten-year bonds payable. What is the effect of the failure to record premium amortization on interest expense and bond carrying value, respectively?
a. Understate; understate
b. Understate; overstate
c. Overstate; overstate
d. Overstate; understate
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