Which of the Following Is True Regarding the Effective Interest

question 153

Multiple Choice

Which of the following is true regarding the effective interest amortization method?

• A)Allocates bond interest expense using a changing interest rate.
• B)Allocates bond interest expense using a constant interest rate.
• C)Allocates a decreasing amount of interest over the life of a discounted bond.
• D)Allocates bond interest expense using the current market rate for each period.
• E)Is not allowed by the FASB.

---

Definitions:

Balance Sheet

A financial statement that provides a snapshot of a company’s financial condition at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Purchases Returns

Goods returned to the supplier from the buyer, often due to defects, inaccuracies, or other issues.

Purchases Discounts

Discounts taken by the buyer for early payment of an invoice.

Current Liability

Financial obligations due by a company within a year, including loans, accounts payable, and other short-term debts.