Using the effective-interest method, the amount of bond discount to be amortized for a given period is calculated by:

  1. deducting the amount of cash interest for the period from the amount of interest expense for the period.
  2. adding the amount of cash interest for the period and the amount of interest expense for the period.
  3. deducting the amount of interest expense for the period from the carrying value of the liability.
  4. multiplying the carrying value of the bond at the beginning of the period by the stated interest rate.