Amortization of Bond Premium or Discount
Response to the following :
The appropriate method of amortizing a premium or discount on issuance of bonds is the effective interest method.
Required
1. What is the effective interest method of amortization and how is it different from and similar to the straightline method of amortization?
2. Explain how a company computes amortization using the effective interest method, and why and how do amounts obtained using the effective interest method differ from amounts computed under the straight-line method.