215

question 63

Multiple Choice

215. Which of the following statements regarding the effective-interest method of accounting for bonds characteristics is false?

• A)GAAP always requires use of the effective interest method.
• B)The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective-interest method is used.
• C)Over the life of the bonds, the carrying value increases for discounted bonds when using the effective-interest method.
• D)The effective-interest method applies a constant percentage to the bond carrying value to compute interest expense.

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Definitions:

Productive Efficiency

A situation in which an economy or a production process can no longer produce additional amounts of a good without lowering the production level of another product, effectively utilizing all resources.

Distorted Priorities

A situation where resources or efforts are misallocated, focusing on less important issues at the expense of more critical ones.

Economic Concepts

Fundamental ideas that form the basis of economic theory and analysis, such as supply and demand, inflation, and gross domestic product.

Economic Laws

Theories or principles that describe behaviors and outcomes in economical activities, often derived from observed patterns and generalized across situations.