Asked by blake mitchell on Jun 01, 2024
Verified
The amortization of a premium on bonds payable decreases bond interest expense.
Premium
An amount paid in addition to a standard price or rate, or the amount above par value for a security.
Bond Interest Expense
The cost incurred by an issuer of bonds for the interest payments made to bondholders over a period.
- Gain insight into how the amortization of bond premiums or discounts influences interest expenditure.
Verified Answer
JH
Jordan HurstJun 06, 2024
Final Answer :
True
Explanation :
Amortization of a premium on bonds payable decreases the amount of interest expense recognized on the bond each year, as the premium is gradually deducted from the bond's face value over its term. This results in a lower interest expense and lower overall cost of borrowing for the bond issuer.
Learning Objectives
- Gain insight into how the amortization of bond premiums or discounts influences interest expenditure.