Under the effective-interest method of amortization, the cash payment on each interest payment date is calculated by multiplying the:
A) carrying value of the bonds times the effective-interest rate for the appropriate time period
B) carrying value of the bonds times the stated interest rate for the appropriate time period
C) face value of the bonds times the effective-interest rate for the appropriate time period
D) face value of the bonds times the stated interest rate for the appropriate time period

Question

Quizplus · Accepted Answer

The cash payment on each interest payment date under the effective-interest method of amortization is calculated by multiplying the face value of the bonds times the stated interest rate for the appropriate time period. This calculation determines the actual cash amount paid to bondholders, which remains constant over the life of the bond.

Under the Effective-Interest Method of Amortization, the Cash Payment on Each