Neville Co. issued 20-year term bonds at a discount in 20x5. Interest is payable

Question

Neville Co. issued 20-year term bonds at a discount in 20x5. Interest is payable semiannually. Which of the following statements is true, assuming that the effective interest method of amortization is used for the bond discount?

a. Interest expense increases each six-month interest period. b. Interest expense decreases each six-month interest period. c. Interest expense remains constant in amount for each interest period. d. Interest expense as a percentage of the bond's book value changes from period to period.

Explanation / Answer

a. interest expense increases each six month interest period.

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