205. A bond discount must

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A bond discount should be amortized using the effective-interest method if it yields annual amounts that are materially different than the straight-line method. The effective-interest method takes into account the actual interest rate implicit in the bond, whereas the straight-line method assumes an equal amount of amortization each year. If the difference between the two methods is not material, either method can be used. However, if the difference is material, the effective-interest method is required under GAAP.

205. a Bond Discount Must