CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

When bonds are issued at a discount, the long-term liability reported on the balance sheet for the bonds ______

A. decreases or increases each year, depending on the stated interest rate.
B. increases each year during the life of the bond.
C. decreases each year during the life of the bond.
Correct Answer: B

The discount is amortized each period in the amount of the difference between the interest expense and the interest paid. As the discount is amortized, the book value of the liability will increase until it reaches maturity value.

User Contributed Comments 4

User Comment
kalps As the end value needs to be the PAR value that needs to be paid at maturity
bhaynes Pull to par baby...Pull to par!!!
jonan203 pull to par, i like that!
nmech1984 haynes you rock! hehe
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