1. Explain the change in carrying amount of the bonds, in terms of the difference between the periodic interest expense recorded on the corporations income statement and the cash interest paid to investors.

2. Does the diagram illustrate the straightline or effective interest method of bond premium and discount amortization? How can you tell?

The following diagram shows how the carrying amount of bonds payable changes over time for bonds issued at a premium, at par, and at a discount. The following diagram shows how the carrying amount of bonds payable changes over time for bonds issued at a premium, at par, and at a discount