For a firm using the direct method,amortization of bond premium should be added back to net income when determining cash payments for interest.

Question

Quizplus · Accepted Answer

In the direct method of preparing the cash flow statement, interest payments are reported as actual cash outflows for interest, and the amortization of bond premium is not added back to net income because it does not affect cash; it is a non-cash adjustment that was already accounted for in the calculation of net income.

For a Firm Using the Direct Method,amortization of Bond Premium