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Cozette Gatson
on Nov 13, 2024

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When the effective-interest method of bond premium amortization is used the

A) amount of premium amortized will get larger with successive amortization.
B) carrying value of the bonds will increase with successive amortization.
C) interest paid to bondholders will increase after each interest payment date.
D) interest rate used to calculate interest expense will be the contractual rate.

Effective-Interest Method

An accounting practice used to allocate loan or bond interest expense over the life of the loan/bond based on the loan's/bond's yielding interest rate.

Bond Premium Amortization

The gradual reduction over time of the amount by which a bond's purchase price exceeds its face value.

Carrying Value

Another term for book value; it's the value at which an asset is recognized on the balance sheet.

  • Compare how the effective-interest method and the straight-line method influence interest expense and the carrying amount of bonds.
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Ellie DuggerNov 17, 2024
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