Which of the Following Statements Regarding the Effective-Interest Method of Accounting

question 32

Multiple Choice

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

• A) GAAP usually 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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