When bonds are issued at a discount, the long-term liability reported on the balance sheet for the bonds ______

A. decreases or increases each year, depending on the stated interest rate.
B. increases each year during the life of the bond.
C. decreases each year during the life of the bond.

Correct Answer: B

The discount is amortized each period in the amount of the difference between the interest expense and the interest paid. As the discount is amortized, the book value of the liability will increase until it reaches maturity value.