When the effective interest method is used, the amortization of the bond premium
A) increases interest expense each period
B) decreases interest expense each period
C) increases interest expense in some periods and decreases interest expense in other periods
D) has no effect on the interest expense in any period

Question

Quizplus · Accepted Answer

The effective interest method of amortizing the bond premium decreases interest expense each period because the bond's book value decreases as the premium is amortized, leading to a lower interest expense calculation over time.

When the Effective Interest Method Is Used, the Amortization of the Bond