The Effective-Interest Method of Amortization Keeps Interest Expense at the Same

question 147

True/False

The effective-interest method of amortization keeps interest expense at the same dollar amount of the bond's carrying value for every interest payment over the bond's life.

---

Definitions:

Par Common Stock

The face value of common stock as stated in the corporate charter; often a nominal amount that has no relation to its market price.

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.

Retained Earnings

The portion of net income that is kept by a company instead of being paid out as dividends to shareholders, contributing to the company's equity.

Paid-in Capital

The amount of money that a company receives from its shareholders in exchange for shares of stock.