The premium on bonds payable:
A) increases the amount of cash paid to bondholders over the stated rate of interest.
B) decreases the amount of cash paid to bondholders over the stated rate of interest.
C) increases interest expense on the income statement.
D) decreases interest expense on the income statement.

Question

Quizplus · Accepted Answer

The premium on bonds payable decreases interest expense on the income statement because it represents the amount by which the bond's issue price exceeds its face value, effectively reducing the cost of borrowing.

The Premium on Bonds Payable