Effective Interest Bond Discount Amortization in Excel

Effective interest bond discount amortization in Excel will calculate the amortization of a bond discount using the effective method. A bond discount results when bonds are issued for less then the face amount on the bond resulting in a journal entry that will debit cash, credit bonds payable, and credit discount. We will then need to decrease the discount during the life of the bond. We will reduce the discount to interest expense during the bond life. We can use either a straight line method or the effective method to amortize the discount. The straight line method is not the preferred accrual accounting method because it does not apply the matching principle as well as the effective method. The effective method is more complex, however.
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