Question

In: Accounting

what is the straight-line amortization method?

 

Question: In regard to a bond discount or premium, what is the straight-line amortization method?

Solutions

Expert Solution

 

Step 1: Definition of bonds

A bond is a type of long-term liability in which the company issues a bond to fulfill a large number of money needs.

Step 2: Straight-line amortization

Straight-line amortization is a method in which an equal amount of discount or premium is amortized every year. This is a straightforward method to amortize the discount or premium of bonds

 

Amortization is a method to reduce the cost of the asset.

Sahil Dangi answered 2 years ago
Next > < Previous

Related Solutions

Alpha Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal...
Alpha Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal year 2016 Alpha had the following bond payable transactions: January 2, issued ten, $1,000 bonds at 101 1/2. These 5-year bonds are dated January 1, 2016. The contract interest rate is 6%.  Interest is payable semi-annual on January 1 and July 1. July 1, Alpha issued $500,000 of 10%, 10-year bonds.  The bonds are dated January 1, 2016 were issued at 98 1/2, and pay interest...
Alpha company uses the straight-line method for amortization of all bond premium & discounts. During FY...
Alpha company uses the straight-line method for amortization of all bond premium & discounts. During FY 2016 Alpha had the following bond payable transaction: -January 2, issued 10, $1,000 bonds at 102 1/2. These 5-year bonds are dated January 1, 2016. The contract interest rate is 6%. Interest is payable semi-annual on January 1 and July 1. -July 1, Alpha issued $500,000 of 10%, 10-year bonds. These bonds are dated January 1, 2016, were issued at 88 1/2, and pay...
Alpha Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal...
Alpha Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal year 2017 Alpha had the following bond payable transactions: January 2, issued ten, $1,000 bonds at 101. These 5-year bonds are dated January 1, 2017. The contract interest rate is 6%.  Interest is payable semi-annual on January 1 and July 1. July 1, Alpha issued $400,000 of 10%, 10-year bonds.  The bonds are dated January 1, 2017 were issued at 90, and pay interest on July...
Halsey Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal...
Halsey Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal year 2017 Halsey had the following bond payable transactions: January 2, issued ten, $1,000 bonds at 101. These 5-year bonds are dated January 1, 2017. The contract interest rate is 6%.  Interest is payable semi-annual on January 1 and July 1. July 1, Halsey issued $400,000 of 10%, 10-year bonds.  The bonds are dated January 1, 2017 were issued at 90, and pay interest on July...
how does the effective interest method for a bond discount or premium differ from straight-line amortization?...
how does the effective interest method for a bond discount or premium differ from straight-line amortization? why does GAPP require this method?
PREPARING JOURNAL ENTRIES Legend Company uses the straight-line method for amortization of all bond premium &...
PREPARING JOURNAL ENTRIES Legend Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal year 2018 Legend had the following bond payable transactions: January 2, issued ten, $1,000 bonds at 101. These 5-year bonds are dated January 1, 2017. The contract interest rate is 6%.  Interest is payable semi-annual on January 1 and July 1. July 1, Legend issued $400,000 of 10%, 10-year bonds.  The bonds are dated January 1, 2017 were issued at 90, and pay...
What is the effect of using the accelerated depreciation method (as opposed to the straight-line method)...
What is the effect of using the accelerated depreciation method (as opposed to the straight-line method) for assets on a company’s earnings before taxes (EBT), and thus the tax liability?
1.b Explain straight-line depreciation and give an example of an entry. 1.a What is amortization and...
1.b Explain straight-line depreciation and give an example of an entry. 1.a What is amortization and when is that used?
compare and contrast the amortization of discounts/premiums using the effective interest and straight line methods. In...
compare and contrast the amortization of discounts/premiums using the effective interest and straight line methods. In 200 worlds.
Straight -line amortization of bond premium or discount Four Seasons issues $2,000,000 of 8 %, 4...
Straight -line amortization of bond premium or discount Four Seasons issues $2,000,000 of 8 %, 4 -year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,030,000. Required 1. Prepare the January 1, 2017, journal entry to record the bonds’ issuance. 2. For each semiannual period, compute ( a ) the cash payment, (b) the straight-line premium or discount amortization, (c)the bond interest expense( d). Unamortized...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT