Straight Line Amortization

(Step by step procedure)

1. Total Premium or Discount

Initial measurement (FV - TC) or (PV of CF) xx

Less: Face amount (xx)

Total premium or discount xx

2. Periodic Amortization

Total premium or discount = Annual amortization

Term of the bonds

Interest Expense

Nominal Interest (Face*NR) xx

Less: Amortization of premium (xx)

Add: Amortization of discount xx

Interest expense xx

Carrying Amount

Carrying amount - beginning xx

Less: Amortization of premium (xx)

Add: Amortization of discount xx

Carrying amount - ending xx

How much cash was received from the issuance of the bonds?

Issue Price

Accrued interest (Principal amount x Nominal interest x x/12)

Total

Less: Bond issue cost

Net cash received

Carrying amount - 1/1/19 xx

Effective Interest xx

Nominal Interest (xx)

Carrying amount - 12/31/19 xx

Initial Carrying amount - Beg xx

Effective interest + 1 1+x

Nominal interest (xx)

Carrying amount - Ending xx

Face amount (xx)

Premium xx