For bonds issued at a premium,the difference between interest expense and the cash paid increases the carrying value of the bonds.

Question

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For bonds issued at a premium, the difference between interest expense and the cash paid decreases the carrying value of the bonds. This is because the premium paid upfront increases the initial carrying value of the bonds, and this amount is gradually reduced over time as the excess interest expense is recognized. As a result, the carrying value of the bonds decreases, rather than increasing.

For Bonds Issued at a Premium,the Difference Between Interest Expense