Explain the method for discount and premium amortization


Response to the following problem:

Titania Co. sells $400,000 of 12% bonds on June 1, 2012. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2016. The bonds yield 10%. On October 1, 2013, Titania buys back $120,000 worth of bonds for $126,000 (includes accrued interest). Give entries through December 1, 2014. Use the effective-interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. Assume no reverse entries were made.

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Managerial Accounting: Explain the method for discount and premium amortization
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