A Company Uses the Effective Interest Method to Amortize a Bond

question 57

Multiple Choice

A company uses the effective interest method to amortize a bond premium.Which of the following statements is true regarding the carrying value of the bond?

• A)The carrying value will decrease by equal amounts each year.
• B)The carrying value will decrease by smaller amounts each year.
• C)The carrying value will decrease by larger amounts each year.
• D)The carrying value will be lower than the face value of the bond until maturity.

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Definitions:

Downsizing

The process of reducing the size of a company's workforce to improve its efficiency and reduce costs, often leading to layoffs.