Question

During the current period, Roberts recognized interest expense of $9,400 and paid interest of $9,000 related to its discounted bonds. The amortization recognized during the current period was:____________.

Answer 1

Answer:

amortization on discount on BP 400

Explanation:

When there is a difference between the face value and the issuance proceeds from the bond a premium or discount is created.

When the proceeds are above, there will be a premium and the interest expense will be lower thant the actual cash outlay on the bond.

When theface value is above the proceeds, there is a discount.and expenses are higher than cash payment to bondholders.

In this case the expense is higher so there is a discount.