When bonds are sold at a premium and the effective interest method is used, at each interest payment date, the interest expense:
A) Remains constant.
B) Is equal to the change in book value.
C) Increases.
D) Decreases.

Question

Quizplus · Accepted Answer

When bonds are sold at a premium and the effective interest method is used, the book value of the bond decreases over time as the premium is amortized. Since the interest expense is calculated based on the book value of the bond, which decreases, the interest expense also decreases over time.

When Bonds Are Sold at a Premium and the Effective