1. Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the:

a. interest paid plus bond premium amortization

b. interest rate times the book value of the bonds

c. interest rate times the face value of the bonds

d. interest paid minus bond premium amortization

2. Which of the following is not a reason for the issuance of long-term liabilities?

a. Debt financing offers an income tax advantage.

b. Ownership interest is diluted.

c. Debt may be the only available source of funds.

d. Debt financing may have a lower cost.