When a company amortizes a premium, the interest expense recorded is
A) more than the cash paid.
B) less than the cash paid.
C) equal to the cash paid.
D) all of the above can be correct.

Question

Quizplus · Accepted Answer

When a company amortizes a premium on a bond, the interest expense recorded is less than the cash paid because the premium effectively reduces the bond's yield to maturity. The amortization of the premium decreases the carrying amount of the bond over time, leading to a lower interest expense recognized in the financial statements compared to the actual cash interest paid.

When a Company Amortizes a Premium, the Interest Expense Recorded