Either the Straight-Line Method or the Effective-Interest Method of Amortization

question 11

Multiple Choice

Either the straight-line method or the effective-interest method of amortization will always result in

• A)the same amount of interest expense being recognized over the term of the bonds.
• B)the same amount of interest expense being recognized each year.
• C)more interest expense being recognized than if premium or discounts were not amortized.
• D)the same carrying value each year during the term of the bonds.

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Definitions:

Credit Report

A detailed report of an individual's credit history prepared by a credit bureau and used by lenders to determine a loan applicant's creditworthiness.

Aging of Receivables

The process of categorizing accounts receivable according to the length of time an invoice has been outstanding for better management of credit risk.

Extending Credit

The act of allowing a buyer to purchase goods or services now and pay for them later, typically involving terms and conditions regarding repayment.

Cash Flow

The total amount of money being transferred into and out of a business, particularly in terms of liquidity and financial planning.