Use of the Effective-Interest Method in Amortizing Bond Premiums and Discounts

question 111

Multiple Choice

Use of the effective-interest method in amortizing bond premiums and discounts results in

• A) a greater amount of interest income over the life of the bond issue than would result from use of the straight-line method.
• B) a varying amount being recorded as interest income from period to period.
• C) a variable rate of return on the book value of the investment.
• D) a smaller amount of interest income over the life of the bond issue than would result from use of the straight-line method.