We have also issued a $1,000,000 bond maturing in four years and paying interest semiannually. The bond was issued at a discount and ignoring bond issuance costs, the bonds were issued at a total price of $973,396. [5] The bond was issued with an annual coupon rate of 5.5% and interest expense on the income statement will exceed interest payments. We set the fixed coupon rate at a level we were comfortable paying in terms of the semiannual payments, but had market rates on comparable bonds been [6] higher at issuance, the initial carrying value of the bond would have been lower and the amortization of the discount would have been lower. For the journal entry at issuance, the difference between the cash proceeds received at issuance and the bond payable liability will be a debit to Discount on Bonds Payable of $26,604. Going forward, [7] the unamortized discount will get smaller each year until maturity. The coupon rate is fixed for the life of the bond, but if market rates increase in 2022, [8] the book value of the bond will decline.

[5] The bond was issued with an annual coupon rate of 5.5% and interest expense on the income statement will exceed interest payments.

Group of answer choices

ORIGINAL TEXT

DELETE TEXT

The bond was issued with an annual coupon rate of 4.75 percent and interest expense on the income statement will exceed interest payments.

The bond was issued with an annual coupon rate of 2.75 percent and interest payments on the income statement will exceed interest expense.

The bond was issued with an annual coupon rate of 2.375 percent and interest payments on the income statement will exceed interest expense.

[6] higher at issuance, the initial carrying value of the bond would have been lower and the amortization of the discount would have been lower.

Group of answer choices

ORIGINAL TEXT

DELETE TEXT

higher at issuance, the initial carrying value of the bond would have been lower and amortization of the discount would be lower.

lower at issuance, the initial carrying value of the bond would have been higher and amortization of the discount would be lower.

lower at issuance, per period interest expense would be higher and amortization of the discount would be lower.

[7] the unamortized discount will get smaller each year until maturity.

Group of answer choices

ORIGINAL TEXT

DELETE TEXT

Amortization will result in debits to the Discount over time.

bond payable will increase every period until maturity when it is shown at $1,000,000.

the differential between interest expense and interest paid will get smaller each period.

[8] the book value of the bond will decline.

Group of answer choices

ORIGINAL TEXT

DELETE TEXT

the book value of the bond will increase.

the interest expense will be higher than projected.

the market value of the bond will decline.