Which of the Following Statements About Bond Accounting Under the Effective

question 19

Multiple Choice

Which of the following statements about bond accounting under the effective interest method is correct?

• A)The cash interest paid is calculated as the bond face value * the yield rate.
• B)The interest expense is calculated as the carrying value * the yield rate.
• C)The difference between the cash interest paid and the interest expense is added to the carrying value of bonds sold at a premium.
• D)The difference between the interest expense and the interest paid is deducted from the carrying value of bonds sold at a discount.

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