Under the effective-interest method of amortization, the amount of discount amortized each interest period is equal to the:
A) total discount divided by the number of interest payments to be made
B) amount of interest expense plus the cash paid
C) amount of interest expense less the cash paid
D) total amount of interest expense divided by the number of interest payments to be made

Question

Quizplus · Accepted Answer

The effective-interest method of amortization involves calculating interest expense based on the carrying value of the bond at the beginning of each period. The amount of discount amortized each period is the difference between the interest expense calculated and the cash paid for interest during the period. Therefore, the correct answer is C as it represents the amount of discount amortized each period.

Under the Effective-Interest Method of Amortization, the Amount of Discount