Interest expense on the income statement will exceed the annual interest payment to bondholders if bonds are issued at a premium.

Question

Quizplus · Accepted Answer

Interest expense on the income statement reflects the effective interest rate, which takes into account any premiums or discounts paid for the bonds. Therefore, if bonds are issued at a premium, the interest expense on the income statement will be lower than the actual annual interest payment to bondholders.

Interest Expense on the Income Statement Will Exceed the Annual