Match these terms with their definitions.
-Under this method, interest expense for the period is always the yield (i.e., effective interest rate) times the carrying value of the bonds at the beginning of the period.
A)Bond
B)Contract, coupon, stated rate
C)Discount
D)Effective interest rate method
E)Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question

Quizplus · Accepted Answer

The effective interest rate method is an accounting practice used for amortizing the discount or premium on bonds payable. Under this method, the interest expense for a given period is calculated by multiplying the bond's carrying value at the beginning of the period by the effective interest rate (which is also referred to as the market rate or yield). This method results in a varying amount of interest expense over the life of the bond, as the carrying value of the bond changes due to the amortization of the discount or premium.

Match These Terms with Their Definitions