The Result of Using the Effective Interest Method of Amortization

question 113

Multiple Choice

The result of using the effective interest method of amortization of discount on bonds is that the

• A)interest expense for each amortization period is constant.
• B)effective interest rate for each amortization period is constant.
• C)amount of interest expense decreases each period.
• D)cash interest payment is greater than the interest expense.

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Definitions:

Maturity Date

The date on which the final payment on the bond is due from the bond issuer to the investor.

Note Receivable

A financial asset representing a written promise for a debtor to pay a specified sum of money to the creditor on a determined future date or on demand.

Dishonored Note

A promissory note that has not been paid by the issuer at the time of its due date.

Fully Paid

Fully Paid denotes a status where all required payments for a service or product have been completed, with no outstanding amounts due.