Question

Which one of the following statements about amortization of discounts and premiums is not correct?

A) Under straight-line amortization, when a bond is sold at a premium, the annual premium amortization is the total premium divided by the number of years until bond maturity.

B) When a bond is sold at a discount, interest expense recorded using the effective-interest method is less than the interest paid on the bond.

C) The effective-interest method of amortization is considered to be conceptually superior to straight-line amortization.

D) When a bond discount is amortized using the effective-interest method, the promised interest payment is less than the interest expense, so the bond liability will increase as a result of the contra-liability account decreasing.

Answer

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