The Entry to Record the Amortization of a Premium on Bonds

question 75

Multiple Choice

The entry to record the amortization of a premium on bonds payable on an interest payment date would be

• A) a debit to Premium on Bonds Payable and a credit to Interest Revenue
• B) a debit to Interest Expense and a credit to Premium on Bond Payable
• C) a debit to Interest Expense and Premium on Bonds Payable and a credit to Cash
• D) a debit to Bonds Payable and a credit to Interest Expense

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Definitions:

Market

A system or an area where buyers and sellers interact to trade goods, services, or financial instruments.

Positive Externality

A benefit gained by a third party not directly involved in a transaction or activity, where the social or economic gain is not reflected in the market price.

Social Planner

A theoretical decision-maker in economics who aims to achieve optimal outcomes for society by considering the allocation of resources and distribution of goods and services.

Subsidy

A payment made by the government to a firm, industry, or individual, usually to encourage the production of a certain good or service or to reduce its price for consumers.