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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