Which Method of Amortization Results in Periodic Amortization Expense That

question 159

Multiple Choice

Which method of amortization results in periodic amortization expense that may fluctuate from one period to the next, but not necessarily in a steadily upward or downward direction?

• A) Sum-of-the-years'-digits
• B) Declining balance
• C) Straight-line
• D) Output or service hours

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Definitions:

Effective Annual Rates

The real return on an investment, taking into account the effect of compounding interest over multiple periods within a year.

Equal Installments

Periodic payments of the same amount over the term of a loan or investment.

Borrowed

Borrowed refers to funds that have been taken on loan from external sources, which are expected to be paid back with interest over time.

Daily Compounding

The process where the interest on an investment is calculated daily and added to the principal, so that each subsequent calculation of interest includes interest previously earned.