Asked by Dinesh Sivanesan on May 12, 2024
Verified
The effective interest amortization method:
A) Allocates bond interest expense over the bond's life using a changing interest rate.
B) Allocates bond interest expense over the bond's life 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 interest period.
E) Is not allowed by the FASB.
Effective Interest Amortization
A method of allocating loan interest payments over the life of the loan, taking into account the varying principal amounts.
Interest Expense
The cost incurred by an entity for borrowed funds over a period of time, typically expressed as an annual rate.
Bond's Life
The period from the issuance of a bond until it matures and the principal is repaid.
- Utilize the effective interest method and straight-line method for amortization of bond interest.
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Learning Objectives
- Utilize the effective interest method and straight-line method for amortization of bond interest.
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