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    Financial Assets at FV Option

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    Christine Jane Abang
    The effective interest method amortizes bond discount and premium by comparing the interest earned using the effective rate to the interest received using the nominal rate, with the difference representing the discount or premium amortization, and adjusting the carrying amount of the bond investment accordingly.

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    Financial Assets at FV Option

    Uploaded by

    Christine Jane Abang
    5 views1 page
    The effective interest method amortizes bond discount and premium by comparing the interest earned using the effective rate to the interest received using the nominal rate, with the difference representing the discount or premium amortization, and adjusting the carrying amount of the bond investment accordingly.

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    Financial Assets at Fv Option

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    The effective interest method amortizes bond discount and premium by comparing the interest earned using the effective rate to the interest received using the nominal rate, with the difference representing the discount or premium amortization, and adjusting the carrying amount of the bond investment accordingly.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    5 views1 page

    Financial Assets at FV Option

    Uploaded by

    Christine Jane Abang
    The effective interest method amortizes bond discount and premium by comparing the interest earned using the effective rate to the interest received using the nominal rate, with the difference representing the discount or premium amortization, and adjusting the carrying amount of the bond investment accordingly.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    Explain the effective interest method of amortizing bond discount and bond premium

    The effective interest method simply requires the comparison between the interest earned or interest
    income and the interest received.
    The difference between the two represents the premium or discount amortization.
    Interest earned or interest income is computed by multiplying the effective rate by the varying amount
    of the bond investment. Interest received is computed by multiplying the nominal rate by the face
    amount of the bond. The carrying amount of band investment is the initial cost gradually increased by
    periodic amortization of discount or gradually in decrease by periodic amortization of premium

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