Under the effective-interest method of amortizing bond premiums, the interest expense recorded for each semi-annual interest payment:
A) will equal the amount of cash paid for each semi-annual interest payment
B) is at the same percentage of the bond's carrying value for every interest payment
C) will increase over the life of the bond
D) is equal to the carrying value of the bond times the contract rate of interest for each semi-annual interest period

Question

Quizplus · Accepted Answer

The effective-interest method of amortizing bond premiums involves applying a constant interest rate to the carrying amount of the bond for each period, which means the interest expense is at the same percentage of the bond's carrying value for every interest payment.

Under the Effective-Interest Method of Amortizing Bond Premiums, the Interest