Under the effective-interest method of amortizing bond premium,the interest expense recorded for each semiannual interest payment
A)is equal to the market rate of interest times the bond's carrying value at the beginning of the period.
B)will increase over the life of the bond.
C)is equal to the carrying value of the bond times the nominal rate of interest for each semiannual interest payment.
D)will equal the amount of cash paid for each semiannual interest payment.
E)will be the same amount each interest payment date.

Question

Quizplus · Accepted Answer

Under the effective-interest method, the interest expense recorded for each semiannual interest payment is calculated as a percentage of the bond's carrying value at the beginning of the period, which is determined by multiplying the market rate of interest by the bond's carrying value. The interest expense will increase over the life of the bond because the carrying value decreases as the bond approaches maturity.

Under the Effective-Interest Method of Amortizing Bond Premium,the Interest Expense