Bonds were initially issued at a discount.Under the effective interest method,what impact will this have on interest expense?

Question

Quizplus · Accepted Answer

Under the effective interest method, interest expense is calculated by multiplying the carrying value of the bonds (which includes any discount or premium) by the effective interest rate. Since the discount will decrease as the bonds approach their maturity date, the carrying value will increase, resulting in an increase in interest expense. Therefore, choice B is the best answer.

Bonds Were Initially Issued at a Discount