Amortization of a premium on a bond payable increases interest revenue.

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Amortization of a premium on a bond payable decreases interest revenue. When a bond is issued at a premium, it means that the bond's coupon rate is higher than the prevailing market interest rate. Therefore, the issuer receives more cash upfront than the bond's face value. The premium is then amortized over the life of the bond, with the result of reducing the amount of interest revenue recognized each period.

Amortization of a Premium on a Bond Payable Increases Interest