The result of using the effective interest method of amortization of discount on bonds is that the
A)interest expense for each amortization period is constant.
B)effective interest rate for each amortization period is constant.
C)amount of interest expense decreases each period.
D)cash interest payment is greater than the interest expense.

Question

Quizplus · Accepted Answer

The effective interest method of amortization of discount on bonds results in a constant effective interest rate for each amortization period. This is because the interest expense is calculated based on the carrying value of the bond, which decreases as the discount is amortized over time. Therefore, the amount of interest expense may change each period, but the effective interest rate remains constant.

The Result of Using the Effective Interest Method of Amortization