Under the effective-interest method of amortization, the cash payment on each interest payment date will:
A) remain the same for each interest period
B) increase if bonds are issued at par
C) decrease if bonds are issued at a premium
D) increase if bonds are issued at a discount

Question

Quizplus · Accepted Answer

The effective-interest method of amortization involves keeping the cash payment constant for each interest period, regardless of whether the bonds are issued at par, premium, or discount. The method adjusts the amount of interest expense recognized by changing the amount of amortization, not the cash payment.

Under the Effective-Interest Method of Amortization, the Cash Payment on Each