Gibson Corporation Amortizes Its Bonds Using the Effective Interest Method

Multiple Choice

Gibson Corporation amortizes its bonds using the effective interest method. Which statement is correct?

A) [Interest expense] = [Stated rate] X [Carrying value of the bonds]
B) [Interest expense] - [Cash interest paid] = [Increase in carrying value if sold at a discount]
C) [Cash interest payment] = [Bond face amount] X [Market interest rate]
D) [Interest expense] - [Cash interest paid] = [Increase in carrying value if sold at a premium]