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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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