Question

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? Multiple Choice Carrying value and interest expense decrease. Carrying value increases and interest expense decreases. Carrying value and interest expense increase. Carrying value decreases and interest expense increases.

Answer 1

Carrying value decreases and interest expense increases

Step-by-step explanation:

Bonds issued at a discount has its market price below the face value, which means that the market interest rate exceeds the coupon rate of the bond.

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds is that carrying value decreases and interest expense increases.