Trout Corporation issues its bonds at a discount. Amortization of the discount will:
A) decrease bond interest expense.
B) increase bond interest expense.
C) decrease the carrying value of the bonds on the balance sheet.
D) be reported as a loss on the income statement.

Question

Quizplus · Accepted Answer

Amortizing the discount on bonds increases bond interest expense over the life of the bonds because it involves gradually writing off the discount on bonds payable (which was initially recognized because the bonds were sold for less than their face value) to interest expense over the term of the bonds.

Trout Corporation Issues Its Bonds at a Discount