When the Effective-Interest Method of Amortization Is Used,what Happens to Interest

question 210

Multiple Choice

When the effective-interest method of amortization is used,what happens to interest expense as a bond moves toward maturity?

• A)Interest expense falls for bonds sold at either a discount or a premium.
• B)Interest expense rises for bonds sold at a discount and falls for bonds sold at a premium.
• C)Interest expense rises for bonds sold at either a discount or a premium.
• D)Interest expense falls for bonds sold at a discount and rises for bonds sold at a premium.

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Definitions:

Cost Reconciliation Report

A document that compares and explains the differences between expected costs and actual costs.

Conversion Costs

Expenses incurred in the process of converting raw materials into finished goods, typically including labor and overhead.

Weighted-Average Method

A cost accounting method that calculates the cost of inventory based on the average cost of all similar items in inventory, irrespective of when they were purchased.

Molding Department

A specialized section in a manufacturing facility where the molding of materials into parts or products is performed.