When the discount on bonds is amortized, the annual interest expense will
A) remain the same over all interest periods.
B) increase each interest period.
C) decrease each interest period.
D) fluctuate depending on the market rate of interest.

Question

Quizplus · Accepted Answer

When the discount on bonds is amortized, the carrying value of the bond increases over time, which leads to an increase in the interest expense recognized in each subsequent period under the effective interest method. This is because the interest expense is calculated based on the carrying amount of the bond, which includes the amortized discount.

When the Discount on Bonds Is Amortized, the Annual Interest