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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