Under the Effective-Interest Method of Amortization, the Amount of Discount

question 15

Multiple Choice

Under the effective-interest method of amortization, the amount of discount amortized each interest period is equal to the:

• A)total amount of interest expense, divided by the number of interest payments to be paid.
• B)total discount, divided by the number of interest payments to be made.
• C)amount of interest expense plus the cash paid.
• D)amount of interest expense less the cash paid.

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Definitions:

Consolidated Cost Of Goods Sold

The aggregated cost of goods that have been used up in the production of goods or services sold by a company and its subsidiaries.

Year-end

The end of a fiscal year or calendar year, when companies close their books and summarize financial activities.

Eliminate Intra-entity Transfer

A consolidation procedure that removes transactions between entities within the same corporate group to avoid double counting in consolidated financial statements.

Equity Method

An accounting technique used to assess the profits earned by a company through its investment in another company, by reporting the income based on the investee's net income and changes in equity.