Asked by
Alyssa Fisher
on Nov 13, 2024Verified
When the effective interest method is used, the amortization of the bond premium
A) increases interest expense each period
B) decreases interest expense each period
C) increases interest expense in some periods and decreases interest expense in other periods
D) has no effect on the interest expense in any period
Effective Interest Method
A way of amortizing the bond premium or discount over the life of the bond in a manner that reflects a constant rate of interest.
Bond Premium
The amount by which the market price of a bond exceeds its principal amount or face value, typically as a result of changes in interest rates.
Interest Expense
The expenses an entity faces for borrowing funds, encompassing payments for loans, bonds, or credit lines.
- Acquire knowledge on how to apply the effective interest method for the amortization of bond discounts and premiums.
Verified Answer
NR
Learning Objectives
- Acquire knowledge on how to apply the effective interest method for the amortization of bond discounts and premiums.