197

question 172

Multiple Choice

197. Either the straight-line method or the effective-interest method of amortization will always result in

• A) the same amount of interest expense being recognized over the term of the bonds.
• B) the same amount of interest expense being recognized each year.
• C) more interest expense being recognized than if premium or discounts were not amortized.
• D) the same carrying value each year during the term of the bonds.

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Definitions:

Inventory

The quantity of goods or materials that a business has on hand at any given time.

Inventoriable Costs

Costs that are considered as assets on the balance sheet until the related goods are sold, at which point these costs are transferred to the cost of goods sold on the income statement.

Cost of Goods Purchased

The total expenses incurred to acquire inventory that is intended for resale.

Beginning Inventory

The value of a company's inventory at the start of an accounting period, serving as a basis for calculating cost of goods sold.