203. Either the straight-line method or the effective-interest method of amortization will always result in A)the same amount of interest expense being recognized over the term of the bonds. B)the same amount of interest expense being recognized each year. C)more interest expense being recognized than if premium or discounts were not amortized. D)the same carrying value each year during the term of the bonds.

Question

Quizplus · Accepted Answer

Both the straight-line method and the effective-interest method of amortization will result in the same total amount of interest expense being recognized over the term of the bonds. This is because the effective interest rate used in the effective-interest method incorporates the premium or discount on the bonds, resulting in a level amount of interest expense each period. Similarly, the straight-line method spreads the premium or discount evenly over the term of the bond, resulting in the same amount of interest expense each period. Therefore, choice A is correct.