For Bond Amortization, Private Companies Reporting Under ASPE

question 37

Multiple Choice

For bond amortization, private companies reporting under ASPE

• A) must use the effective-interest method.
• B) are not allowed to use the effective-interest method.
• C) may use any amortization method they wish, as long as the results do not differ materially from the effective-interest method.
• D) may use any amortization method they wish, regardless of the results.

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Definitions:

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its price, reflecting the ability of a company or individual to meet immediate and short-term obligations.

Precautionary Motive

The desire to hold cash or other liquid assets to meet unexpected needs and financial emergencies.

Financial Slack

The availability of excess funds or resources in a company that allows for flexibility in operations, strategic investments, or weathering financial uncertainties without immediate financial stress.

Keynes

Refers to John Maynard Keynes, a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and economic policies of governments.