Which of the Following Is Correct About the Effective-Interest Method

question 67

Multiple Choice

Which of the following is correct about the effective-interest method of amortization?

• A)The effective-interest method applied to debt investments is different from that applied to bonds payable.
• B)Amortization of a discount decreases from period to period.
• C)Amortization of a premium decreases from period to period.
• D)The effective-interest method applies the effective-interest rate to the beginning carrying amount for each interest period.

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Definitions:

Limited Liability Company

A firm's structure that integrates the aspect of limited liability similar to a corporation with the pass-through tax benefit akin to that of a partnership or sole proprietorship.

Corporate Veil

A legal concept that separates the actions and liabilities of a corporation from its shareholders, protecting them from personal liability.

Syndicate

A group of individuals or firms that join together to finance a project; also called an investment group.

Corporation

A legal entity that is separate from its owners, offering limited liability to its shareholders, and able to own property, enter contracts, and sue or be sued.