Which of the Following Statements About Bond Accounting Under the Effective

question 46

Multiple Choice

Which of the following statements about bond accounting under the effective interest method is correct?

• A) The cash interest paid is calculated as the bond face value × the effective rate.
• B) The interest expense is calculated as the carrying value × the effective rate.
• C) The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium.
• D) The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount.

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Definitions:

Atomic Element

A pure chemical substance consisting of one type of atom distinguished by its atomic number, which is the number of protons in its nucleus.

Electrical Conductivity

A measure of how well a material allows the flow of electric current through it.

Valence Shell

Outermost orbital shell in an atom. The number of electrons in the valence plays a role in defining the electrical and physical characteristics of an element.

Chemical Properties

Characteristics of a substance that dictate how it reacts with other substances to form new products.