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**Unformatted text preview: **constant amounts of amortization and interest expense per period but a varying percentage rate. Companies follow three steps under the effective-interest method: 1. Compute the multiplying the c the beginning of effective-interest 2. Compute the bond interest paid (or accrued) by multiplying by the contractual interest rate. 3. Compute the amortization amount by determining the diffe computed in steps (1) and (2). Illustration 10B-1 depicts these steps. Computation of amortization using effective-interest method Both the straight-line and effective-interest methods of amortization result in the same total amount of interest expense over the term of the bonds. Furthermore, interest expense each interest period is generally comparable in amount. However, when the amounts are materially different , generally accepted accounting principles (GAAP) require use of the effective-interest method....

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