If bonds have been issued at a discount, over the life of the bonds, the
A) amortized cost of the bonds will decrease.
B) amortized cost of the bonds will increase.
C) interest expense will decrease, if the discount is being amortized on a effective interest basis.
D) unamortized discount will increase.

Question

Quizplus · Accepted Answer

CWhen bonds are issued at a discount, the amortized cost of the bonds will increase over time as the discount is amortized. This is because the discount represents an additional cost of borrowing that is recognized over the life of the bond, effectively increasing the carrying amount of the bond towards its face value. Additionally, if the discount is being amortized on an effective interest basis, the interest expense will increase over the life of the bond, not decrease, as the carrying amount of the bond increases, leading to a higher interest expense calculation each period.

If Bonds Have Been Issued at a Discount, Over the Life