3. If bonds sell at a premium, the interest expense recognized each year will be greater than the contractual interest rate. A) True B) False I 3. If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded. A) True B) False 5. Premium on Bonds Payable A) has a debit balance. B) is a contra account. C) is considered to be a reduction in the cost of borrowing. D) is deducted from bonds payable on the balance sheet