The bonds outstanding method of amortizing a discount on serial bonds
A)amortizes an increasing amount of discount each period based on the present value of the bonds outstanding at the beginning of the period
B)amortizes an equal amount of discount each period over the life of the entire bond issue
C)amortizes a decreasing amount of discount each period based on the present value of the bonds outstanding at the beginning of the period
D)amortizes a proportional share of the discount each period based on the face value of the bonds outstanding at the beginning of the period relative to the sum of the face values of the bonds outstanding at the beginning of each period over the life of the entire issue

Question

Quizplus · Accepted Answer

The bonds outstanding method amortizes a proportional share of the discount each period based on the face value of the bonds outstanding at the beginning of the period relative to the sum of the face values of the bonds outstanding at the beginning of each period over the life of the entire issue. This method reflects the changing amount of bonds outstanding over time as serial bonds are gradually redeemed.

The Bonds Outstanding Method of Amortizing a Discount on Serial