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:

Dialectical Reasoning

A method of argument that involves a process of logical reasoning and dialogue to explore contradictions and opposing viewpoints.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making.

Mindless Processing

Describes cognitive activities that occur without conscious awareness or effort, often in response to familiar stimuli.

Automatic Pilot

A mode of operation where tasks are performed unconsciously or without active thought, often used metaphorically to describe habitual or rote behavior.