What effect will bond premium amortization have on interest

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Reference no: EM13257255

On January 1, 20x7, Clyde County issued $100 million of 5%,20-year bonds at 102. Interest is payable semiannually. Theproceeds were restricted for the construction of a new county waterpurification plant for its Water Enterprise Fund.

What effect will the bond premium amortization have on interestexpense in 20x7, assuming straight-line amortization is used whereappropriate?

A. No effect.

B. Increase interest expense by $100,000

C. Decrease interest expense by #100,000

D. None of the above

Reference no: EM13257255

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