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:

Capital Invested

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Business Operations

All the activities involved in the day-to-day running of a business that directly relate to its producing and delivering its products or services.