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Explain why interest expense is greater than interest paid

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Reference no: EM13531906

Presented below is the partial bond discount amortization schedule for Syam Corp., which uses the effective-interest method of amortization.

Interest

Bond

Interest

Interest to

Expense to

Discount

Unamortized

Carrying

Periods

Be Paid

Be Recorded

Amortization

Discount

Value

Issue date


$38,609

$961,391

1

$45,000

$48,070

$3,070

35,539

964,461

2

45,000

48,223

3,223

32,316

967,684

Instructions

(a) Prepare the journal entry to record the payment of interest and the discount amortization at the end of period 1.

(b) Explain why interest expense is greater than interest paid.

(c) Explain why interest expense will increase each period.

Reference no: EM13531906

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