The bond premium or discount is amortized to interest expense until the bond is redeemed or matures. There are two amortization methods: the straight-line method and the interest method. The straight-line method amortizes identical interest expenses to each period. The interest method uses a constant rate of interest. The amortization of premiums decreases interest expense, while the amortization of discounts increases interest expense.
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AMORTIZATION OF DISCOUNTS & PREMIUMS
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- Back Matter