A bond discount must

Question

Quizplus · Accepted Answer

The effective-interest method must be used if it yields annual amounts that are materially different than the straight-line method. However, if the difference is not material, either method can be used. Therefore, option A and D are incorrect. Option B is incorrect as it is not always the case that the effective-interest method must be used for bond discounts. The FASB requires the use of the effective-interest method for bond discount amortization. However, if the use of straight-line amortization yields annual amounts that are materially different than the effective-interest method, the effective-interest method must be used instead. This ensures that the amortized discount amount more accurately reflects the interest expense over the life of the bond.

A Bond Discount Must