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- In regard to a bond discount or premium, what is the straight-line amortization method?Does interest expense increase or decrease when a bond premium is amortized?The premium on bonds payable account is shown on the balance sheet as A contra asset. A reduction of an expense. An addition to a long-term liability. A subtraction from a long-term liability.
- Amortizing the discount and premium on bonds is done in two ways. Describe each one.Explain how each of the columns in an amortization schedule is calculated, assuming the bonds are issued at a discount. How is the amortization schedule different if bonds are issued at a premium?When the effective interest rate method is used, the amortization of the bond premium
- According to the PFRS, discount or premium on bonds payable may be amortized using the straight-line method.What is the straight-line amortization approach with regards to a bond discount or premium?A bond is purchased at a discount and will be accounted for under the amortized cost model. The entry to record the amortization of the discount includes a O debit to the investment account. O debit to Interest Income. O credit to the investment account. O debit to "Gain from Discount.
- what is the required method of amortizing discount and premium on bonds payable? Explain the procedures.Assuming the bonds are issued at a discount, explain how each column in an amortization schedule is determined. When bonds are issued at a premium, how does the amortization schedule differ?Part I:. The appropriate method of amortizing a premium or discount on issuance of bonds is the effective‐interest method. Instructions a. What is the effective-interest method of amortization and how is it different from and similar to the straight‐line method of amortization? b. How is amortization computed 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? Part II: Gains or losses from the early extinguishment of debt that is refunded can theoretically be accounted for in three ways: 1. Amortized over remaining life of old debt. 2. Amortized over the life of the new debt issue. 3. Recognized in the period of extinguishment. Instructions a. Develop supporting arguments for each of the three theoretical methods of accounting for gains and losses from the early extinguishment of debt. b. Which of the methods above is generally accepted and how should…