If a company uses the effective interest method of amortizing a bond premium,the carrying value of the bond
A)will decrease by equal amounts each year.
B)will decrease by smaller amounts each year.
C)will decrease by larger amounts each year.
D)will be lower than the face value of the bond until maturity.

Question

Quizplus · Accepted Answer

Under the effective interest method, the carrying value of the bond decreases by larger amounts each year because the interest expense decreases as the carrying value decreases, leading to a larger amortization of the premium.

If a Company Uses the Effective Interest Method of Amortizing