Which of the following is correct when using the effective-interest method of amortizing the discount on bonds payable?
A)Interest expense is computed by adding the portion of amortized discount to the cash interest paid.
B)The amount of interest expense recognized each period increases over time.
C)The amount of discount amortized each period decreases over time.
D)The book value of the bonds payable liability decreases.

Question

Quizplus · Accepted Answer

The effective-interest method results in an increasing amount of interest expense recognized each period because it applies a constant interest rate to the carrying amount of the bonds, which increases as the discount is amortized.

Which of the Following Is Correct When Using the Effective-Interest