When the Straight-Line Method of Amortization Is Used for a Bond

question 104

Multiple Choice

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

• A)adding the amount of discount amortized for that period to the amount of cash paid for interest during the period.
• B)subtracting the amount of discount amortized for that period from the amount of cash paid for interest during the period.
• C)multiplying the face value of the bonds by the stated interest rate.
• D)multiplying the face value of the bonds by the market interest rate.

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Definitions:

Median

The middle value or point in a data set, where half the data lies above and half below it.

Empirical Rules

Statistical rules that allow for the determination of probability within a normal distribution, stating percentages of data that lie within certain standard deviations from the mean.

Standard Deviations

Measures of how spread out the numbers in a dataset are, indicating the degree of variation from the mean.

Observations

Individual data points or measurements collected during an experiment or survey.