217. When the effective-interest method of bond discount amortization is used, A) the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date. B) the carrying value of the bonds will decrease each period. C) interest expense will not be a constant dollar amount over the life of the bond. D) interest paid to bondholders will be a function of the effective-interest rate on the date the bonds are issued.

Question

Quizplus · Accepted Answer

The effective-interest method results in varying interest expense amounts over the life of the bond because it applies the constant market interest rate to the changing carrying amount of the bond.