Amortization of the Premium on Bonds Payable Is Subtracted from Net

question 28

Multiple Choice

Amortization of the premium on bonds payable is subtracted from net income in the reconciliation of net income to cash flows from operations because

• A) interest expense understates the cash paid for interest by the amount of the premium amortization.
• B) it reduces income without causing a cash outflow.
• C) it increases income without causing a cash flow.
• D) it is a financing cash outflow.

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Definitions:

Decision Making

The process of choosing among alternatives to achieve a goal or solve a problem.

Herfindahl-Hirschman Index

A measure used to determine the level of competition within a market, calculated based on the sum of the squares of market shares of all firms within the market.

Market

A place or system in which commercial transactions occur between buyers and sellers for goods, services, or financial assets.

Herfindahl-Hirschman Index

A measure of market concentration that is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.