Final answer:
The false statement regarding the effective-interest method of accounting for bonds is that the amount of periodic interest expense decreases over the life of a discounted bond issue, when in fact it increases.
Step-by-step explanation:
The statement B) 'The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective-interest method is used' is false regarding the effective-interest method of accounting for bonds. Under the effective-interest method, the interest expense for a discounted bond increases each period because this method applies a constant interest rate to the carrying value of the bond, which increases over time as the discount is amortized. GAAP (Generally Accepted Accounting Principles) require the use of the effective-interest method when interest expense must be reported, and it provides a more accurate reflection of the cost of borrowing over the life of the bond.
By contrast, the carrying value of a discounted bond indeed increases over time, which aligns with statement C). The effective-interest method spreads the discount or premium on bonds over their life until it reaches its face value at maturity, as mentioned in statement D).