1.

The effective interest method is more theoretically correct when amortizing the discount or premium and calculating the interest revenue on a bond because interest revenue is calculated using a decreasing or increasing carrying value.

Group of answer choices

The amount of interest revenue is a function of time.

The amount of interest revenue is a function of the fair market value of the bond.

The amount of interest revenue is calculated using a decreasing or increasing carrying value.

2.

The Premium on Bond Investments is what type of account?

Group of answer choices

asset

adjunct asset (adds on)

contra asset

liability

adjunct liability (adds on)

contra liability

income/revenue/gain

expense/loss

stockholder's equity

3.

For a bond classified as Available for Sale an INCREASE in the fair market value of the bond over carrying value at the reporting date does what to retained earnings?

Group of answer choices

Increase

Decrease

No impact

Unable to determine