How many of the following statements regarding amortization of discounts or premiums are true? 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.
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.
The effective-interest method of amortization is considered to be conceptually superior to straight -line
Amortization.
When a bond premium 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.
A) One
B) Two
C) Three
D) Four

Question

Quizplus · Accepted Answer

The first and third statements are true. The first statement correctly describes the straight-line amortization of a bond premium. The third statement is true as the effective-interest method is considered conceptually superior because it reflects the time value of money. The second and fourth statements are false.

How Many of the Following Statements Regarding Amortization of Discounts