Which of the Following Statements Regarding the Effective-Interest Method of Amortization

question 36

Multiple Choice

Which of the following statements regarding the effective-interest method of amortization is incorrect?

• A)The amount of interest expense is different each period.
• B)The amount of discount or premium that is amortized increases each period.
• C)It is one of the options according to generally accepted accounting principles.
• D)The total interest expense over the life of a bond is the same as that reported under the straight-line method of amortization.

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Definitions:

Variable Selling Expense

includes costs that vary directly with sales volume, such as commissions, shipping charges, and promotional expenses.

Direct Labor Wage Rate

The amount paid per hour or per unit of production to employees who directly manufacture or assemble products.

Raw Materials Cost

The total expense associated with the raw materials used in the production of goods or services.

Administrative Expense

Costs related to the general administration of a business, such as salaries of executive officers and costs of general services.