Question
How many of the following statements regarding amortization of discounts or premiums are true? Under straight-line amortization, when a bond is sold at a premium,
How many of the following statements regarding amortization of discounts or premiums are true? Under straight-line amortization, when a bond is sold at a premium, the annual premium amortization is the total premium divided by the number of years until bond maturity. When a bond is sold at a discount, interest expense recorded using the effective-interest method is less than the interest paid on the bond. The effective-interest method of amortization is considered to be conceptually superior to straight-line amortization. When a bond premium is amortized using the effective-interest method, the promised interest payment is less than the interest expense, so the bond liability will increase as a result of the contra-liability account decreasing. A. One B. Two C. Three D. Four
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