Which of the following statements about bond accounting under the effective interest method is correct?
a. The cash interest paid is calculated as the bond face value × the effective rate.
b. The interest expense is calculated as the carrying value × the effective rate.
c. The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium.
d. The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount.
b
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