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Unformatted text preview: under straight-line and effective interest methods. Effective Interest Method . In teaching this part of the chapter the following relationships may be emphasized: a. Carrying Value of Bonds = Face Value Plus Premium or Less Discount b. Interest Expense = Market Interest Rate x Carrying Value of Bonds c. Interest Payable = Stated Interest Rate x Face Value of Bonds d. If a premium exists: Interest expense will be less than interest paid or payable. e. If a discount exists: Interest expense will be greater than interest paid or payable. f. Difference between interest expense and interest paid or payable is the amount of amortization of the discount or premium. 5. Review accounting for bonds issued between interest dates 6. Issuance expenses may be treated as an immediate expense or as a reduction of the related liability and amortized. Treatment as a deferred charge is no longer an acceptable method under GAAP....
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This note was uploaded on 03/28/2012 for the course ACCTG ACC423 taught by Professor Smith during the Spring '10 term at University of Phoenix.
- Spring '10