Question

Question: Will the amortization of Discount on Bonds Payable increase or decrease Bond Interest Expense? Explain.

Short answer

Answer

The amortization of discount on bonds payable will increase bond interest expense for the period such that interest expense surpasses the interest payment to bondholders

Step-by-step solution

Meaning of discount on bonds payable

The organized apportioned of the discount on bonds payable, listed as a debit in a contra-liability account, to bond interest expense over the term of the bonds.

Increase in bond interest expense due to amortization of discount on bonds payable

The discount is amortized to interest expense over the duration of the bond, the discount is literally surplus interest expense that is ought to be paid as the contract price of bond was less than the market value on the date of bond issuance.