The straight-line method of computing interest expense is preferred over the effective interest method because it is easier to calculate and is more precise.

Question

Quizplus · Accepted Answer

The statement is false. The effective interest method is considered more precise as it takes into account the changing balance of the loan or investment throughout the period, while the straight-line method assumes a constant balance. Additionally, while the straight-line method may be easier to calculate, it does not accurately reflect the true cost of borrowing or the true yield on an investment.

The Straight-Line Method of Computing Interest Expense Is Preferred Over