Which of the Following Statements Regarding the Effective Interest Method

question 82

Multiple Choice

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

• A)GAAP requires the 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 bond, 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:

Phillips Curve

An economic theory suggesting an inverse relationship between the rate of inflation and the rate of unemployment within an economy.

Policy Makers

Individuals or bodies responsible for formulating and implementing public policies, laws, and regulations, often within governmental or legislative institutions.

Aggregate Supply

The total supply of goods and services that are available to consumers in an economy at a given price level in a given period.

Passive Approach

A passive approach involves a non-interventionist or minimal-effort strategy of dealing with situations, often contrasted with active strategies that require direct action.