The effective-interest amortization method allocates an amount of bond discount or premium,based on the market interest rate at issuance,to each interest period over the life of the bond.

Question

Quizplus · Accepted Answer

This is correct. The effective-interest amortization method uses the market interest rate at issuance to allocate bond discount or premium over the life of the bond. This results in a varying amount of interest expense being recognized each period, reflecting the changing value of the bond over time.

The Effective-Interest Amortization Method Allocates an Amount of Bond Discount