The bonds outstanding method of amortizing a discount on serial bonds amortizes

Question

The bonds outstanding method of amortizing a discount on serial bonds

amortizes an increasing amount of discount each period based on the present value of the bonds outstanding at the beginning of the period

amortizes an equal amount of discount each period over the life of the entire bond issue

amortizes a decreasing amount of discount each period based on the present value of the bonds outstanding at the beginning of the period

amortizes a proportional share of the discount each period based on the face value of the bonds outstanding at the beginning of the period relative to the sum of the face values of the bonds outstanding at the beginning of each period over the life of the entire issue

amortizes an increasing amount of discount each period based on the present value of the bonds outstanding at the beginning of the period

amortizes an equal amount of discount each period over the life of the entire bond issue

amortizes a decreasing amount of discount each period based on the present value of the bonds outstanding at the beginning of the period

amortizes a proportional share of the discount each period based on the face value of the bonds outstanding at the beginning of the period relative to the sum of the face values of the bonds outstanding at the beginning of each period over the life of the entire issue

Explanation / Answer

The Correct Answer is (D)

amortizes a proportional share of the discount each period based on the face value of the bonds outstanding at the beginning of the period relative to the sum of the face values of the bonds outstanding at the beginning of each period over the life of the entire issue

(a) The Statement is not correct for any method of amortization

(B) The statement is correct for Straigth line method of amortization

(c) The statement is correct for INterest rate method

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