209. Which of the following statements regarding the effective-interest method of accounting for bonds characteristics is false? A) IFRS prefers the use of the effective-interest method. B) The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective-interest method is used. C) Over the life of the bonds, the carrying value increases for discounted bonds when using the effective-interest method. D) The effective-interest method applies a constant percentage to the bond carrying value to compute interest expense.

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Quizplus · Accepted Answer

The amount of periodic interest expense actually increases over the life of a discounted bond issue when the effective-interest method is used, as the carrying amount of the bond increases.