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Which is true of a premium on bonds payable

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Reference no: EM132817138

Problem 1: Which of the following is true of a premium on bonds payable?

a. It is a contra-stockholders' equity account.

b. It is an account that appears only on the books of the investor.

c. It increases when amortization entries are made until it reaches its maturity value.

d. It decreases when amortization entries are made until its balance reaches zero at the maturity date.

Problem 2: Use of the effective interest method in amortizing a premium on bonds payable would result in

a. A constant amount of premium amortization each period over the life of the bonds

b. A decreasing amount of premium amortization each period over the life of the bonds

c. An increasing amount of premium amortization each period over the life of the bonds

d. Cannot be determined from the information given.

Reference no: EM132817138

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