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    Question

    The effective interest method is used

    to:
    A Allocate interest income only on cash basis Correct Answer Incorrect Answer
    B Allocate finance cost/interest over life of financial instrument so that carrying amount is amortised using effective interest rate Correct Answer Incorrect Answer
    C Compute tax liability Correct Answer Incorrect Answer
    D Calculate depreciation of assets Correct Answer Incorrect Answer
    E Determine dividend payout Correct Answer Incorrect Answer

    Solution

    Effective interest method amortises premium/discount on financial assets/liabilities.

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