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Hi, please help to these questions and explain why? S26 Ch14/. If bonds are issued initially...

Hi, please help to these questions and explain why?

S26 Ch14/. If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be
a. greater than if the straight-line method were used.
b. greater than the amount of the interest payments.
c the same as if the straight-line method were used.

7 Ch14/. Amortization of a premium increases bond interest expense, while amortization of a discount decreases bond interest expense?
d. less than if the straight-line method were used.

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Answer #1

Solution:

If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be "greater than if the straight-line method were used." because in straight line method, premium is amortized equally at each interest date while under effective interest method, premium amortization is increasing gradually with each interest period.

Hence option a is correct.

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