The interest expense is amortized over the twenty periods during which interest is paid. Amortization of the discount may be done using the straight-line or the effective interest method. Currently, generally accepted accounting principles require use of the effective interest method of amortization unless the results under the two methods are not significantly different. If the amounts of interest expense are similar under the two methods, the straight-line method may be used. The straight-line method of allocating the discount to interest expense (also called amortization of the discount) spreads the $623 of discount evenly over
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This note was uploaded on 12/25/2011 for the course FIN 3312 taught by Professor Staff during the Spring '08 term at Texas State.