1. If market interest rates are higher than the rate offered on the bonds being sold, they will be sold at:
A. a premium.
B. a discount.
C. face value.
D. a loss.
2. When bonds are issued at a premium, the bond premium:
A. reduces the amount of interest expense over the life of the bonds.
B. increases the amount of interest expense over the life of the bonds.
C. does not change the amount of interest expense over the life of the bonds.
D. is charged to interest expense when the bond is issued.
3. If bonds are issued for a price below their face value, the bond discount should be:
A. charged to expense on the date the bonds are issued.
B. amortized over the life of the bond issue.
C. shown as an addition to Bonds Payable in the Long-Term Liabilities section of the balance sheet.
D. shown as a current liability on the balance sheet.