Question

A company invests in a 5-year debt security at a discount. The security is classified as HTM. Using the effective interest method, the company will report interest revenue on this security that is:________

Answer 1

Answer:

The company will report a varying amount of interest income for time to time

Explanation:

Because when a bond is sold at a premium, the rate of the bond premium must be  amortized to interest expense in the duration of the bond. I.e

Credit balance in the account Premium on Bonds Payable must be moved

to the account Interest Expense to reduce interest expense in each

of the accounting periods that the bond is outstanding.