ACCOUNTING
equation for total interest on a discount
(PMT*n)+original discount
interest expense has a normal balance of
Debit
Cash Interest payment PMT=
Face Value*Stated Rate*Time
Bond payable is always at
Face value
Bonds that may be retired at a prearranged price are called:
callable bonds
Bonds payable minus the Discount on bonds payable yields the:
carrying amount
Interest Expense =
carrying value*i
on incurring an interest expense discounts and premiums are
contra meaning they go opposite on the journal entry
Bonds that can be exchanged for stock are called:
convertable bonds
Bonds that are backed only by the credit of the issuing company are:
debenture bonds.
A $260,000 issue of bonds that sold for $255,000 matures on June 25, 2020. The journal entry to record the payment of the bond on the maturity date is to:
debit Bonds payable, $260,000; credit Cash, $260,000
Amortization of discount
increases interest expense
If the market rate of interest is less than the bond's stated rate of interest, the bond will be issued at:
premium
Interest expense will be less than the interest payment when bonds are issued at
premium
issuance price is the same as
present value
The amount that a borrower must pay back to the bondholders on the maturity date is the:
principle
Bonds that are backed by collateral are:
secured bonds
Bonds from the same bond issue that mature at different times are called:
serial bonds.
Bonds that mature all at the same time are:
term bonds
Debenture bonds are the same as:
unsecured bonds
the carrying value is the
Present value