Under the effective-interest method,the amount of bond discount amortized each interest period is equal to the:
A)amount of interest expense less the cash paid for interest.
B)amount of interest expense plus the cash paid for interest.
C)face value of the bond times the stated interest rate.
D)face value of the bond times the market interest rate at the date of issue.

Question

Quizplus · Accepted Answer

Under the effective-interest method, the amount of bond discount amortized each interest period is calculated as the difference between the interest expense and the cash paid for interest. The interest expense is calculated as the effective interest rate multiplied by the carrying value of the bond at the beginning of the period. The cash paid for interest is the amount of interest paid during the period. Therefore, the amount of bond discount amortized each period is equal to the interest expense less the cash paid for interest.

Under the Effective-Interest Method,the Amount of Bond Discount Amortized Each