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    Daniela Velez
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    This document discusses bonds, including discount bonds, premium bonds, and amortizing discounts and premiums. It provides an example of calculating the proceeds from issuing a $1,000,000 face value bond at a discount of 2% of par value. It also shows an example of a bond issued at a premium, with a table demonstrating the amortization of the premium over the life of the bond through reductions to the interest expense.

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    This document discusses bonds, including discount bonds, premium bonds, and amortizing discounts and premiums. It provides an example of calculating the proceeds from issuing a $1,000,000 face value bond at a discount of 2% of par value. It also shows an example of a bond issued at a premium, with a table demonstrating the amortization of the premium over the life of the bond through reductions to the interest expense.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Download as xlsx, pdf, or txt
    4 views7 pages

    Chapter 15 Practice

    Uploaded by

    Daniela Velez
    This document discusses bonds, including discount bonds, premium bonds, and amortizing discounts and premiums. It provides an example of calculating the proceeds from issuing a $1,000,000 face value bond at a discount of 2% of par value. It also shows an example of a bond issued at a premium, with a table demonstrating the amortization of the premium over the life of the bond through reductions to the interest expense.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 7

    Chapter 15

    Market price = present value

    Rate or cupon
    Bond* rate * times of the rate

    Bonds
    Discount Market price Premium

    Price
    below
    market
    value Price above market value

    Table

    Bond Coupon Eff maturity Price Yield

    interest payments
    Interest expense debit Interest expense
    Cash cedit Interest payable

    Maturuty of the payment


    Bonds payable debit
    Cash credit

    Issue date and sale date

    pmt = face value*interest rate full* 6/12


    Normally bonds are semianually
    Face valueRate/2 year*2 FV PMT
    1000000 3.14% 20 -$ 980,163.82 30000

    98% of face value = 980000/1000000*100


    Rate at market price

    Reord Debit Credit


    Cash 980000
    Discount a 20000
    Bonds Payable 1000000

    Payable recort

    Long term liabilities


    Bonds payble 1000000
    Less discount on bon 20000

    Face valueRate/2 year*2 FV PMT


    1000000 0.0275 20 -$ 1,038,068.13 30000

    Long term liabilities


    Bonds payble 1000000
    Plus premium on bon 381000
    $ 1,038,068.13
    30000
    Amortization

    Take the discount or the premium and

    (discount or premium*periods)

    Premium 38100/20

    Interest expense 30000


    Cash 30000

    Premium bonds payab 1905


    Interest expense 1905

    Bond Info semianual


    Maturity value 1000000 Years 5
    interest rate 5% 0.025 Periods 10
    Market inerest rate 6% 0.03 Premiun $ 957,348.99
    Pmt 5% 25000 3%
    Pmt 6% 30000
    Discount $ 42,651.01

    A B C D E F

    Unamortaiz
    Semi- ed discount
    anual interest discount (proceeding Bond carring
    interest payment Interest amortization E -current amount (face
    period 2.5% expense 3% (b-c) d) value -e)

    Issue date $ 42,651.01


    1 25000 $ 28,720.47 $ 3,720.47 $ 38,930.54 $ 961,069.46
    2 25000 $ 28,832.08 $ 3,832.08 $ 35,098.46 $ 964,901.54
    3 25000 $ 28,947.05 $ 3,947.05 $ 31,151.41 $ 968,848.59
    4 25000 $ 29,065.46 $ 4,065.46 $ 27,085.96 $ 972,914.04
    5 25000 $ 29,187.42 $ 4,187.42 $ 22,898.54 $ 977,101.46
    6 25000 $ 29,313.04 $ 4,313.04 $ 18,585.49 $ 981,414.51
    7 25000 $ 29,442.44 $ 4,442.44 $ 14,143.06 $ 985,856.94
    8 25000 $ 29,575.71 $ 4,575.71 $ 9,567.35 $ 990,432.65
    9 25000 $ 29,712.98 $ 4,712.98 $ 4,854.37 $ 995,145.63
    10 25000 $ 29,854.37 $ 4,854.37 $ 0.00 $ 1,000,000.00
    11
    e*interest rate full* 6/12

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