Simply divide the $3,000 discount by the number of reporting periods. Suppose, for example, a company issues five-year bonds for $100,000, but due to a $3,000 discount, it receives only $97,000 from investors.

The straight-line method uses the same amount of bond discount during each reporting period using the following formula:Īmortization = (Bond Issue Price – Face Value) / Bond Term The journal entry for amortizing a bond's discount cost on a balance sheet is usually listed as an interest expense. If the company issues monthly statements, the bond's amortization cost should also be calculated monthly. If a corporation issues financial statements only once a year, the amortization cost can be recorded annually or semiannually depending on how the bond's anniversary month aligns with the company's year end.

This is the easy way to calculate an amortized cost.