When the Effective-Interest Method of Amortization Is Used,what Happens to Interest

question 210

Multiple Choice

When the effective-interest method of amortization is used,what happens to interest expense as a bond moves toward maturity?

• A)Interest expense falls for bonds sold at either a discount or a premium.
• B)Interest expense rises for bonds sold at a discount and falls for bonds sold at a premium.
• C)Interest expense rises for bonds sold at either a discount or a premium.
• D)Interest expense falls for bonds sold at a discount and rises for bonds sold at a premium.

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Definitions:

Reversing Entries

Reversing entries are journal entries made at the beginning of an accounting period to negate the effects of certain adjustments made in the previous period.

Classified Balance Sheet

A financial statement that groups assets, liabilities, and equity into categorized sections for easier analysis.

Closing Entries

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.

Long-term Note Payable

A debt obligation that is due for repayment beyond one year's time, representing a form of long-term financing.