Which of the Following Is True Regarding Accounting for Amortization

question 199

Multiple Choice

Which of the following is true regarding accounting for amortization of bond discount and premium?

• A) GAAP is required to use the straight-line method.
• B) IFRS is required to use the effective-interest method.
• C) GAAP must use the effective-interest method, but IFRS may use either the effective-interest method or the straight-line method.
• D) Both IFRS and GAAP must use the effective-interest method.

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Definitions:

Target Cost

The maximum amount that can be spent on a product while still earning the required profit margin, based on market-driven pricing.

Desired Return

The target profit or return on investment that a company or investor aims to achieve.

Investment

Allocation of resources, typically money, in order to generate income or profit over time.

Selling Price

The amount of money a buyer pays to purchase a product or service from a seller.