In accountancy this is probably the most often used methodology to register the amortization of an asset as it is the simplest one to track. Calculate the charge of interest every year in the income statement of the company using the Straight Line method.In the present case, the face value of each of the bond issued is $1,000 and the issue price is $ 970. With the straight line method, the annual depreciation expense equals the cost of the asset minus the salvage value, divided by the useful life (# of years). The calculator will calculate both straight line method amortization, and will also produce an effective interest method bond amortization schedule, setting out for each period, the bond book value opening balance, amount of interest, periodic payment, closing bond balance, and the bond premium or discount amortization. The total amount of discount given for all the bonds comes to $30,000 (discount per bond * number of bonds issued = $30* 1,000).A company needs to amortize this discount given because a discount arises when the bonds are issued by the company at the value less than its face value but the Thus every year $5,000 will be charged in the income statement of the company for the next 6 years.Thus every year $10,000 will be charged in the income statement of the company for the next 7 years.Straight-line amortization equally charges the cost of assets or interest in each of the accounting periods of the company until the end of the life of the intangible asset or until maturity of bond respectively in the income statement of the company.It is a simple and less time-consuming method as every year equal amount is to be charged in the income statement of the company. The straight-line amortization method is the simplest way to amortize a bond or loan because it allocates an equal amount of interest over each accounting period in the debt’s life. So the discount issued per bond comes to $30 ($1,000- $970). The straight line amortization formula is computed by dividing the total interest amount by the number of periods in the debt’s life.

The straight line amortization formula is computed by dividing the total interest amount by the number of periods in the debt’s life. Value at the end of the year per each line is the figure obtained by subtracting the amortization from the start booking figure. Once provided, the calculator will generate a straight line amortization chart for the loan. So we would divide $47,723 by five years to find the amount of interest recorded each period. The following straight line bond amortization schedule demonstrates how the bond book value (122,204) reduces to its par value (120,000) over the lifetime of the bond.The straight line bond amortization schedule is produced as followsThe table starts with the book value of the bond which is the par value (120,000) plus the premium on bonds payable (2,204), which equals the amount of cash received from the bond issue (122,204).Each period the interest expense (4,249) is the interest paid to the bondholders based on the par value of the bond at the bond rate (4,800) less the premium amortized (551).The final column headed premium, shows the difference between the interest expense and the payment for the period, and represents the amortization of the premium (551), which needs to be credited to the interest expense account each period.For each of the four periods the bond accounting journal to record the interest and premium amortization will be as follows:For the sale of clarity, the posting of the actual interest expense (4,800) and the premium amortization (551) are shown separately in the journal above, in practice the net amount of 4,800 – 551 = 4,249 could be posted to the interest expense accountNotice that the effect of this journal is to post the interest of 4,249 to the interest expense account. So, the company is required to When the loan is to be repaid in equal installment then also its is referred to as Straight-line amortization.The formula for the calculation of the Straight Line Amortization is as follows:For Example Company A ltd., issued the 1000 bonds in the market having the face value of $1,000 each at the rate of $970 each. In accountancy this is probably the most often used methodology to register the amortization of an asset as it is the simplest one to track. The concept is similar to straight-line depreciation, where the cost of an asset is charged to expense on an even basis over the useful life of the asset. Straight line depreciation is perhaps the most basic way of calculating the loss of value of an asset over a period of time. Calculate Straight-Line Mortgage. This is where it gets tricky. Using the straight line bond amortization method, the discount is simply amortized at the rate of 2,152 / 4 = 538 each 6 month period.The actual semi-annual cash interest payments on the bond are of course based on the face value of the bond (120,000) and the bond discount rate (8%). Value at the end of the year per each line is the figure obtained by subtracting the amortization from the start booking figure. The straight line calculation, as the name suggests, is a straight line drop in asset value.

Use a straight line amortization chart to gain a solid understanding of how your monthly mortgage payments are allocated from month to month. The following straight line bond amortization schedule demonstrates how the bond book value (117,848) increases to its par value (120,000) over the lifetime of the bond.The bond amortization schedule is produced as followsThe table starts with the book value of the bond which is the par value (120,000) less the discount on bonds payable (2,152), which equals the amount of cash received from the bond issue (117,848).Each period the interest expense (5,338) is the interest paid to the bondholders based on the par value of the bond at the bond rate (4,800) plus the discount amortized (538).The final column headed discount, shows the difference between the interest expense and the payment for the period, and represents the amortization of the discount (538), which needs to be credited to the interest expense account each period.For each of the four periods the bond accounting journal to record the interest and discount amortization will be as follows:For the sale of clarity, the posting of the actual interest expense (4,800) and the discount amortization (538) are shown separately in the journal above, in practice the net amount of 4,800 + 538 = 5,338 could be posted to the interest expense accountNotice that the effect of this journal is to post the interest calculated in the bond amortization schedule (5,338) to the interest expense account.

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