Which of the Following Statements Correctly Describes the Accounting for Bonds

question 94

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 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 amortization of the premium on bonds payable account 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.When bonds are issued at a premium, interest expense over the life of the bonds equals the total payments for interest minus the premium on bonds payable at the issue date.