Straight-line amortization of a premium related to a bond issuance would result in which of the following?
A) Interest expense to be calculated by multiplying the market interest rate times the book value of the bonds.
B) Higher premium amortization in the early years and lower interest expense over the life of the bonds.
C)Calculating the constant amount of premium to be amortized and then subtracting it from cash interest to calculate interest expense.
D)Lower premium amortization in the early years and higher interest expense over the life of the bonds.

Question

Quizplus · Accepted Answer

Straight-line amortization involves calculating a constant amount of premium to be amortized each period, which is then subtracted from the cash interest payment to determine the interest expense.

Straight-Line Amortization of a Premium Related to a Bond Issuance