Dylan Corporation Issues for Cash $2,000,000 of 8%, 15-Year Bonds

Multiple Choice

Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

A) The amount of annual interest paid to bondholders remains the same over the life of the bonds.
B) The amount of annual interest expense decreases as the bonds approach maturity.
C) The amount of annual interest paid to bondholders increases over the 15-year life of the bonds.
D) The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity.