If bonds are issued initially at a discount and the straight-line method of amortization is used for the discount, interest expense in the early years will be:
A)less than if the interest method is used.
B)The same as if the interest method is used.
C)more than if the interest method is used.
D)less than the amount of the interest payments.

Question

Quizplus · Accepted Answer

The straight-line method of amortization spreads the discount on bonds evenly over the life of the bonds, resulting in higher interest expense in the early years compared to the effective interest method, which applies a constant interest rate to the carrying amount of the bond, resulting in a gradually increasing interest expense.

If Bonds Are Issued Initially at a Discount and the Straight-Line