To Calculate the Amount of Interest to Recognize Each Period

question 65

Multiple Choice

To calculate the amount of interest to recognize each period for a bond investment (unless it held for trading purposes) ,

• A) ASPE requires the use of the effective-interest method.
• B) IFRS requires the use of the effective-interest method.
• C) IFRS allows the use of either the effective-interest or the straight-line method.
• D) ASPE requires the use of the straight-line method.

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Definitions:

Debt Ratio

A financial ratio that measures the extent of a company's or individual's leverage, calculated by dividing total liabilities by total assets.

Selling And Administrative Expenses

Combined costs related to the selling of products and the administration of a business, excluding production costs.

Retention Ratio

The proportion of net income that is retained in the business rather than paid out to shareholders as dividends, indicating the amount reinvested in the company.

Interest Expense

This is the cost incurred by an entity for borrowed funds over a period of time, typically expressed as an annual percentage.