Amortized Premium Is Computed Annually When a Bond Is Issued

question 161

Multiple Choice

Amortized premium is computed annually when a bond is issued for other than its face value.For a bond issued at a premium, how will this component change as the bond approaches maturity?

• A) decrease
• B) increase
• C) remain constant
• D) not enough information given to decide

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Definitions:

Salespersons

Individuals employed to sell products or services to customers, often working on commission and responsible for meeting sales targets.

Variable Costing

An accounting method that only includes variable production costs (materials, labor, and overhead) in the cost of goods sold and inventory valuation.

Manufacturing Firms

Companies that use labor, equipment, and raw materials to produce finished goods.

Service Firms

Companies that provide intangible products or services to consumers or other businesses rather than physical goods.