Which One of the Following Statements About Amortization of Discounts

question 240

Multiple Choice

Which one of the following statements about amortization of discounts and premiums is not correct?

• 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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