Asked by
Mirian Alvarez
on Nov 13, 2024
Verified
When there are material differences between the results of using the straight-line method and using the effective interest rate method of amortization, the effective interest rate method should be used.
Straight-Line Method
A method of calculating depreciation by evenly spreading the cost of an asset over its useful life.
Effective Interest Rate
The actual cost of borrowing or the actual return on investment, taking into account the effect of compounding interest as opposed to the nominal rate.
Amortization
The gradual reduction of a debt over a period of time by periodic payments of principal and interest sufficient to repay the loan by maturity.
- Attain an understanding of the key concepts and quantitative analyses tied to the issuance of bonds, like premiums, discounts, and the carrying amount.
Verified Answer
AG
Learning Objectives
- Attain an understanding of the key concepts and quantitative analyses tied to the issuance of bonds, like premiums, discounts, and the carrying amount.