CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

When bonds are issued at a premium, the long-term liability reported on the balance sheet for the bonds ______
A. decreases each year during the life of the bond.
B. increases each year during the life of the bond.
C. decreases or increases each year, depending upon the current market rate.
Explanation: When bonds are issued at a premium (an amount greater than face), the premium is amortized until it reaches zero. As the premium is decreased, the book value of the liability will decrease until it reaches face value at maturity.

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