C. The effective-interest method produces a constant rate of return on the book value of the investment from period to period.
D. Amortization of a discount decreases from period to period.
18) Which of the following is NOT generally correct about recording a sale of a debt security before maturity date?
A. The entry to amortize a premium to the date of sale includes a credit to the Premium on Investments in Debt Securities.
B. A gain or loss on the sale is NOT extraordinary. C. An entry must be made to amortize a discount to the date of sale.
D. Accrued interest will be received by the seller even though it is NOT an interest payment date.
19) Investments in debt securities should be recorded on the date of acquisition at
A. market value plus brokerage fees and other costs incident to the purchase.
B. face value plus brokerage fees and other costs incident to the purchase.
C. market value. D. lower of cost or market.
20) When an investor ‟ s accounting period ends on a date that does NOT coincide with an interest receipt date for bonds held as an investment, the investor must
A. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the total amount of interest to be received at the next interest receipt date.