7252569-MIdterm-1 (dragged) 21

13 bond premiums and discounts may be amortized using

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Unformatted text preview: emiums and discounts may be amortized using the straight-line method as illustrated in paragraph 11. However, the preferred method is the effective interest method. This method computes bond interest using the effective yield at which the bonds are issued. More specifically, interest cost for each period is the effective interest rate multiplied by the carrying value (book value) of the bonds at the start of that period. The effective interest method is best accomplished by preparing a Schedule of Bond Interest 14-5...
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