Question: 1. If bonds issue at a discount, what happens to the carrying value of bonds payable and the amount recorded for interest expense over time?
2. If bonds issue at a premium, what happens to the carrying value of bonds payable and the amount recorded for interest expense over time?
3. Explain how each of the columns in an amortization schedule is calculated, assuming the bonds are issued at a discount. How is the amortization schedule different if bonds are issued at a premium?
4. Why would a company choose to buy back bonds before their maturity date?