Under the effective-interest method,if bonds are issued at a discount,the amount of interest expense:
A)increases each period as the bonds move towards maturity.
B)decreases each period as the bonds move towards maturity.
C)remains the same over the term of the bonds.
D)is less than the cash interest payment.

Question

Quizplus · Accepted Answer

Under the effective-interest method, the amount of interest expense increases each period as the bonds move towards maturity when the bonds are issued at a discount. This is because the bond discount is amortized over the life of the bond through interest expense, meaning that the interest expense increases with time to reflect the decrease in the discount amount.

Under the Effective-Interest Method,if Bonds Are Issued at a Discount,the