The effective interest method yields increasing amounts of bond interest expense and decreasing amounts of premium amortization over the bond's life for bonds issued at a premium.

Question

Quizplus · Accepted Answer

The effective interest method yields a constant rate of interest expense over the life of the bond. While the amount of interest expense remains constant, the amount of premium amortization increases over time, reducing the carrying amount of the bond to its face value at maturity.

The Effective Interest Method Yields Increasing Amounts of Bond Interest