Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 10 - Reporting and Analyzing Liabilities - Questions: 29

Answer

Since the Interest is paid on bonds par value and the issue is at premium, the effective rate on bonds is calculated on bonds carrying value, the effective rate will be less than the interest rate.

Work Step by Step

Hence the amortization of premium will be increase every year, and the interest expense will decrease.
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