117. Indicate whether each of the following statements regarding effective interest amortization is true or false.
_____ a) The effective interest method of bond premium amortization matches interest expense with the declining carrying value of the bond.
_____ b) Interest expense on a bond issued at a discount will be lower in the bond's first year than if the company had used straight-line amortization.
_____ c) The carrying value of a bond issued at a premium will decrease by smaller and smaller amounts each year.
_____ d) Interest expense is calculated by multiplying the beginning carrying value of the bond by the market (effective) rate of interest.
_____ e) Effective interest amortization can only be used on bonds that pay interest annually.
118. Indicate whether each of the following statements is true or false.
_____ a) EBIT stands for equity before income taxes.
_____ b) EBIT is used in the computation of the return-on-assets ratio.
_____ c) The times-interest-earned ratio is computed by dividing interest expense by EBIT.
_____ d) Dividends are deductible in the determination of taxable income.
_____ e) Interest is deducted on the income statement but is ignored on the tax return.