Intermediate accounting 2 Practice Questions with 100% Correct Answers| Graded A+

For a liability to exist, - a past transaction or event must have occurred. 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? - Overstate; overstate Bond discount should be presented in the financial statements of the issuer as a(n) - contra liability Any gains or losses from the early extinguishment of debt should be - recognized in income of the period of extinguishment. For a bond issue that sells for more than its face value, the market rate of interest is - less than the rate stated on the bond. When interest expense is calculated using the effective-interest amortization method, interest expense (assuming that interest is paid annually) always equals the - carrying value of the bonds multiplied by the effective interest rate. Accrued interest on bonds that are sold between interest dates - increases the amount a buyer must pay to acquire the bonds.