Firms must amortize the difference between the issue price and the face value as an adjustment to interest expense over the life of the bonds.

Question

Quizplus · Accepted Answer

This statement is true. The difference between the issue price and the face value of bonds is known as a bond premium or discount. Premiums are amortized as an adjustment to interest expense over the life of the bonds, while discounts are amortized as an addition to interest expense over the life of the bonds.

Firms Must Amortize the Difference Between the Issue Price and the Face