If bonds have been issued at a discount and the effective-interest method is used,the ________ over the life of the bonds.
A)carrying value of the bonds will decrease
B)interest payment will increase
C)interest expense will decrease
D)interest expense will increase

Question

Quizplus · Accepted Answer

Under the effective-interest method, interest expense is calculated by multiplying the carrying value of the bonds by the effective-interest rate for the period. Since bonds issued at a discount have a lower carrying value than their face value, using the effective-interest method will result in a higher interest expense compared to the straight-line method. Therefore, the correct answer is D: interest expense will increase over the life of the bonds.

If Bonds Have Been Issued at a Discount and the Effective-Interest