Amortization of a premium increases bond interest expense, while amortization of a discount decreases bond interest expense.

Question

Quizplus · Accepted Answer

Amortization of a premium decreases bond interest expense because the premium is essentially pre-paid interest that reduces the cost over the bond's life. Conversely, amortization of a discount increases bond interest expense since the discount represents additional interest to be recognized over the bond's term.

Amortization of a Premium Increases Bond Interest Expense, While Amortization