Which One of the Following Statements Regarding Amortization of Discounts

question 90

Multiple Choice

Which one of the following statements regarding amortization of discounts and premiums is not true?

• A)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.
• B)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.
• C)The effective-interest method of amortization is considered to be conceptually superior to straight-line amortization.
• D)When a bond discount 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.

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Definitions:

Treasury Shares

Stocks that the original issuing company repurchased, subsequently decreasing the quantity of available shares in the market.

Percent Ownership

The percentage of an entity or asset owned by an investor or company, often determining the level of control or influence.

Excess Acquisition-Date Fair Value

Refers to the amount by which the fair value of the acquired net assets exceeds the purchase consideration in a business combination.

Indirect Method

A method used in cash flow statement preparation that adjusts net income for non-cash transactions.