139. If bonds with a face value of $200,000 are issued at 98, the amount of cash received from issuing the bonds is $204,082.
140. If bonds are issued at a premium, the amount of the premium must be amortized over the term of the bond.
141. The effective rate of interest for a particular bond issue is the market rate of interest for other investments with similar levels of risk.
142. The effective interest rate method of amortizing bond premium or discount gives a constant amount of interest expense every period.
143. If a bond discount is amortized using the effective interest method, the carrying value of the bond will be lower than if the straight-line method is used.
144. The tax deductibility of interest expense on bonds makes the effective cost of borrowing less than the amount of cash paid for interest.
145. The after-tax interest cost of debt equals total interest expense multiplied by the tax rate.
146. The times interest earned ratio is usually calculated as the ratio of net income to interest expense.