31. A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate.
32. If bonds are issued at a discount, the issuing corporation will pay a principal amount less than the face amount of the bonds on the maturity date.
33. If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.
34. If the market interest rate is greater than the contractual interest rate, bonds will sell at a discount.
35. If $800,000, 6% bonds are issued on January 1, and pay interest semiannually, the amount of interest paid on July 1 will be $24,000.
36. If bonds sell at a premium, the interest expense recognized each year will be greater than the contractual interest rate.
37. The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.
38. The loss on bond redemption is the difference between the cash paid and the carrying value of the bonds.
39. If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded.
40. Gains and losses are not recognized when convertible bonds are converted into common stock.