Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 10 - Reporting and Analyzing Liabilities - Questions - Page 542: 26

Answer

Straight line method of amortizing discount and premium on bonds payable, is to equally write off the discount by premium amount during the life of bonds payable.

Work Step by Step

If a bond has been issued for 5 years, every year 1/5th part (20%) of the discount by premium amount will be written off. The writing of the discount by premium will be adjusted with bonds interest expense.
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