Which of the Following Statements Correctly Describes the Accounting for Bonds

question 11

Multiple Choice

Which of the following statements correctly describes the accounting for bonds that were issued at a premium?

• A)The interest expense over the life of the bond is less than the total cash interest payments.
• B)The interest expense over the life of the bonds increases as the bonds mature when the effective interest method is used.
• C)The amount of amortization of the premium on bonds payable decreases as the bonds mature when the effective interest method is used.
• D)The book value of the bond liability increases when interest payments are made on the due dates when the effective interest method of amortization is used.

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Definitions:

Transfer Warranty

A legal guarantee assumed by a person who transfers a negotiable instrument, asserting that certain conditions about the instrument are met.

Authentic

Genuine or verified to be original and not a copy or fake.

Negotiable Instrument

A voucher confirming the remittance of a specified financial amount, payable either immediately upon demand or on a scheduled date, with the payer's details included on the document.

Alters

In legal or general context, to change or modify something, such as a document, condition, or situation.