Which of the Following Statements Regarding the Effective Interest Method

question 125

Multiple Choice

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

• A) GAAP 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 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:

AIDS

Acquired Immunodeficiency Syndrome, a chronic, potentially life-threatening condition caused by the human immunodeficiency virus (HIV), which damages the immune system and impairs the ability to fight off organisms that cause disease.

HIV

Human Immunodeficiency Virus, a virus that attacks the immune system and can lead to acquired immunodeficiency syndrome (AIDS) if not treated.

Keratin

A tough, hard protein contained in skin, hair, and nails.

KOH Mount

A type of mount used when a physician suspects a patient has a fungal infection of the skin, nails, or hair and to which potassium hydroxide is added to dissolve the keratin in cell walls.