There Are Two Methods for Amortizing Premiums and Discounts on the Sale

question 20

Multiple Choice

There are two methods for amortizing premiums and discounts on the sale of bonds.The differences between the two methods are:

• A) Both methods charge a constant amount of interest to the financial statements each year; however, the effective interest method charges a larger total amount of interest expense over the life of the bond.
• B) The effective interest method charges a different interest expense each year while the straight-line method results in a constant amount of expense each year.
• C) There are no differences between the two methods.
• D) None of these answers are correct.

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