If a company uses the effective interest method of amortizing a bond discount,the interest expense that is recognized each year
A)will be greater than the interest payment.
B)will increase from year to year.
C)will remain the same from year to year.
D)will be greater than the interest payment and also will increase from year to year.

Question

Quizplus · Accepted Answer

The effective interest method results in interest expense that is greater than the interest payment because it includes amortization of the bond discount. Additionally, as the carrying amount of the bond increases each year due to the amortization, the interest expense also increases.

If a Company Uses the Effective Interest Method of Amortizing