If bonds have been issued at a premium, over the life of the bonds, the:
A) carrying value of the bonds will decrease.
B) carrying value of the bonds will increase.
C) interest expense will decrease, if the premium is being amortized on a straight-line basis.
D) premium amortization will decrease.

Question

Quizplus · Accepted Answer

When bonds are issued at a premium, it means the selling price is higher than the face value or the amount of the bond. Over the life of the bonds, the premium will amortize or decrease. As a result, the carrying value of the bonds will decrease. This is because the premium amortization is a reduction in the bond liability, which affects the carrying value.

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