When the effective-interest method of amortization is used,what happens to interest expense as a bond moves toward maturity?
A)Interest expense falls for bonds sold at either a discount or a premium.
B)Interest expense rises for bonds sold at a discount and falls for bonds sold at a premium.
C)Interest expense rises for bonds sold at either a discount or a premium.
D)Interest expense falls for bonds sold at a discount and rises for bonds sold at a premium.

Question

Quizplus · Accepted Answer

Using the effective-interest method of amortization,bonds issued at a discount have an increasing carrying value as they approach maturity,whereas bonds issued at a premium have a decreasing carrying value.As a result,interest expense rises for bonds sold at a discount and falls for bonds sold at a premium as the bond moves toward maturity.

When the Effective-Interest Method of Amortization Is Used,what Happens to Interest