Which of the Following Statements About Bond Accounting Under the Effective

question 46

Multiple Choice

Which of the following statements about bond accounting under the effective interest method is correct?

• A) The cash interest paid is calculated as the bond face value × the effective rate.
• B) The interest expense is calculated as the carrying value × the effective rate.
• C) The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium.
• D) The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount.

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Definitions:

Cooperatives

Organizations owned and operated by a group of individuals for their mutual benefit, where profits and earnings are distributed among the members.

Set Prices

The act of determining the selling cost of goods or services, usually by the manufacturer or by agreement among sellers.

Monopoly Power

The ability to control price and drive competitors out of the market.

Economic Power

The capacity of an entity or country to influence or control economic activities through financial means, production capabilities, or market control.