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

Question

Quizplus · Accepted Answer

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

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