The effective interest method of amortization assumes a stable
A)interest expense
B)interest rate
C)book value
D)amortization amount

Question

Quizplus · Accepted Answer

The effective interest method of amortization assumes a stable interest rate, which is used to calculate the interest expense for each period. The amortization amount will vary depending on the book value of the asset, but it will be calculated based on the stable interest rate. Therefore, choices A and C are incorrect. Choice D is also incorrect as the amortization amount will change each period as the book value gets closer to the salvage value.

The Effective Interest Method of Amortization Assumes a Stable