The effective interest rate method:
A) Allocates bond interest expense using a constant interest rate.
B) Allocates a decreasing amount of interest expense over the life of a bond originally sold at a discount.
C) Allocates interest expense using the contract rate.
D) Allocates bond interest expense using a changing interest rate.
E) Allocates interest expense based on a constant carrying value.

Question

Quizplus · Accepted Answer

The effective interest rate method allocates bond interest expense using a constant interest rate, which is the market rate at the time of issuance.

The Effective Interest Rate Method