Which One of the Following Statements About Amortization of Discounts

question 240

Multiple Choice

Which one of the following statements about amortization of discounts and premiums is not correct?

• A)Under straight-line amortization,when a bond is sold at a premium,the annual premium amortization is the total premium divided by the number of years until bond maturity.
• B)When a bond is sold at a discount,interest expense recorded using the effective-interest method is less than the interest paid on the bond.
• C)The effective-interest method of amortization is considered to be conceptually superior to straight-line amortization.
• D)When a bond discount is amortized using the effective-interest method,the promised interest payment is less than the interest expense,so the bond liability will increase as a result of the contra-liability account decreasing.

Understand and identify various accounting terminologies and their definitions.

Grasp the concept of assets, liabilities, and equity in a business context.

Comprehend different types of business ownership structures and their characteristics.

Recognize the formulas used for calculating financial ratios and their applications.

---

Definitions:

Causation

The relationship between cause and effect, where one event (the cause) directly results in another event (the effect).

Normative Analysis

An approach in economics that involves value judgments or opinions about what the economy should be like or what particular policy actions should be recommended.

Macroeconomics

A branch of economics that deals with performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.

Microeconomics

The branch of economics that focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, borrowers and lenders.