When bonds held as long-term investments are purchased at a price other than the face value, the premium or discount should be amortized over the remaining life of the bonds.

Question

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This is known as the amortization of bond premium or discount, which spreads the cost difference between the purchase price and face value over the bond's remaining life. This adjustment is necessary in order to accurately reflect the true cost of the bonds on the company's financial statements.

When Bonds Held as Long-Term Investments Are Purchased at a Price