When the Effective-Interest Method of Bond Discount Amortization Is Used

question 21

Multiple Choice

When the effective-interest method of bond discount amortization is used,

• A)the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date.
• B)the carrying value of the bonds will decrease each period.
• C)interest expense will not be a constant dollar amount over the life of the bond.
• D)interest paid to bondholders will be a function of the effective-interest rate on the date the bonds are issued.

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