ACCT 1209 Lecture Notes - Lecture 26: Premium Bond, Amortization Schedule, Interest Expense

• School: Northeastern University
• Department: Accounting
• Course: ACCT 1209
• Professor: O' Kelly( G)

Document Summary

Acct 1209 - lecture 26 - bonds issued at a discount, straight line vs. Reporting interest expense on bonds issued at a discount using straight-line. Straight line amortization is a simplified method of amortizing a bond discount or premium that allocates an equal dollar amount to each interest period. To amortize the ,464 bond discount over the life of bonds using straight-line amortization, we allocate an equal dollar amount to each interest period. The amortization of discount each period is: ,464 4 periods = . This amount is added to the cash payment of interest (,000) to compute interest expense for the period (,866). The interest payments on bnsf bonds each period are as follows: The book value increases to ,402 (,536 + ) because of the amortization of the discount. In each interest period, the book value of the bonds increases by because the unamortized discount decreases by .