Generally accepted accounting principles require that when bonds are sold at a discount,the discount must be allocated to interest expense using the
A)cash interest method.
B)effective interest method.
C)bond yield method.
D)cumulative interest methoD.

Question

Quizplus · Accepted Answer

The generally accepted accounting principles require the use of the effective interest method to allocate the discount to the interest expense when bonds are sold at a discount. This method involves calculating the actual interest expense based on the market interest rate and the carrying value of the bonds. It provides a more accurate reflection of the true cost of borrowing than other methods such as the cash interest or bond yield methods. Therefore, option B is the best choice for allocating the discount to interest expense.

Generally Accepted Accounting Principles Require That When Bonds Are Sold