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 u the market rate.
B) The interest expense is calculated as the carrying value u the market rate.
C) The difference between the cash interest paid and the interest expense is added to the carrying value of bonds sold at a premium.
D) The difference between the interest expense and the interest paid is deducted from the carrying value of bonds sold at a discount.
Answer: B
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