TRUE/FALSE When the market rate of interest is less than the contract rate for a bond the bond will sell at a premium. When bonds held as long-term investments are purchased at a price abov ow face value, the premium or discount should be amortized over the remaining life of the bonds. The amortization of discount on bonds purchased as long term investmen increases the amount of the investment account 3. The special fund that is set aside to provide for the payment of bonds at maturity is called a sinking fund. 4. If the market rate of interest is 8% and a corporation's bonds pay interest at 7%, then the bonds will sell at a premium. There are two methods of amortizing a bond discount or premium: the straight-line method and the double-declining balance method. Bondholders claims on the assets of a corporation have priority over stockholders claims to the same assets. If the straight-line method of amortization of discount on bonds payable used, then the amount of yearly interest expense will increase as the bon approach maturity. The amount of interest paid when buying a bond as an investment shoul be credited to the Interest Revenue account The unamortized discount on bonds payable account is a contra liability account. 10. Investments in stocks that are expected to be held for the long term are listed in the stockholder's equity section of the balance sheet The Investments in Bonds account is reported on the balance sheet at th lower of cost or market. 12