Which of the Following Statements Regarding Amortization Is True

question 7

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 premium continues over the life of the bond until the balance in the account is reduced to zero.

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Definitions:

Comparative Advantage

The ability of an individual or economy to produce goods or services at a lower opportunity cost than others.

Opportunity Cost

Giving up potential gainful opportunities from other choices by selecting a specific option.

Talented People

Individuals who possess a high level of skill, ability, or aptitude in specific areas or activities.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost relative to others.