Which of the Following Statements Regarding Amortization Is True

question 8

Multiple Choice

Which of the following statements regarding amortization is true?

• A) Amortization of the premium causes the Premium on Bonds Payable account to increase.
• B) Amortization of the premium causes the amount of interest expense to increase.
• C) Cash interest payments on bonds equals interest expense on the income statement when there is amortization of bond premium.
• D) Amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero.

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Definitions:

Taxes on Labor

Refers to taxes imposed on wages or salaries earned, impacting the net income of employees.

Second Earners

Refers to individuals in a household who contribute income in addition to the primary breadwinner, often impacting households' labor supply decisions and overall economic dynamics.

Price Elasticities

A measure of how much the quantity demanded of a good responds to a change in the price of that good.

Deadweight Loss

An economic inefficiency that occurs when the allocation of resources is not optimal, often resulting from taxes or monopolies.