expenditures incurred in preparing and selling a bond issue such as legal, underwriting, accounting, commission, printing, promotion, and registration fees. These costs represent a deferred chargethat is amortized using the straight-line method over the period the bonds are outstanding (date of issue to the maturity date). Note that the amortization starts from the date the bonds are sold and notthe date of the bonds (which may be before the issue date).
Assume a five-year bond dated 1/1/2000 is sold on 9/1/2000. Bond issue costs are $10,000. Since there are 52 months between 9/1/2000 and 1/1/2005, the amortization per month is $192.31 ($10,000/52 months). The amortization expense for 2000 is $769.24 ($192.31 per month × 4 months from 9/1/2000-12/31/2000).
