When bonds are sold at a premium and the effective interest method is used, at each interest payment date, the interest expense:

Question

ycow [4]

3 years ago

5

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.

Business

1 answer:

Alex73 [517] · Answer 1 · 2022-03-07T06:24:33+03:00

Answer:

decreases

Explanation:

When bonds are sold at a premium, it is sold at a price higher than the par value. For example, if the par value is $100, the bond would be selling at a premium if it is sold at $101. At expiration of the bond's tenor, the price of the bond must equal its par value, so at each each interest payment day, the interest expense decreases