A company invests in a 5-year debt security at a discount. The security is classified as HTM. Using the effective interest method, the company will report interest revenue on this security that is:

Question

Quizplus · Accepted Answer

The effective interest method results in interest revenue that increases over the years for a security purchased at a discount, as the carrying amount of the security increases towards its face value over the holding period.

A Company Invests in a 5-Year Debt Security at a Discount