Question
The first-year accountant in your organization does not understand the difference between the straight-line method and the effective interest method in amortizing a bond's discount.
The first-year accountant in your organization does not understand the difference between the straight-line method and the effective interest method in amortizing a bond's discount. You decide that the best way to help her understand is to develop a PowerPoint presentation that includes a comprehensive example.
Prepare a PowerPoint presentation that explains the difference between the straight-line method and the effective interest method in amortizing a bond's discount. Provide a comprehensive example that includes the following:
- Journal entries to issue the bonds at a discount
- The adjusting entries for the amortization of the bond discount using the effective interest method
- The payment of bond interest to bondholders and the repayment of the bonds
In addition, provide detail on the difference in the amortization of the bond discount under the straight-line and effective interest methods and the impact on the financial statements.
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