There are if statements that read the interest rates

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Unformatted text preview: he difference between face or stated interest and market interest) determines whether the bond was issued at a premium or discount and the amount of that premium or discount. In the “Bonds – Premium” and “Bonds – Discount” worksheets formulas have been kept to an absolute minimum to closely correlate to the textbook presentation. Because of this, the worksheet will only present properly if the proper worksheet is utilized for the data. Contained on each worksheet, off to the right, is also straight-line amortization of the premium or discount on that issue. With the power of worksheets available on the desktop system effective interest amortization computation is almost as easy as straightline amortization – except that because of the varying amount per period for effective interest method the journal entry cannot effectively be memorized. If you look at the “Bond – Premium” worksheet, which is structured to accept semi-annual interest payments only to limit the use of formulas, you can see how the “PV” (Present value) formulas were utilized to determine the present value of the issue. In rows 17 through 19 the journal entry for the issuance of the bond is shown. In cell B24 you can enter the period of interest and see the journal entry for that period. This is done through “Vlookup” formulas in cells E24 through F26. “Vlookup” formulas are discussed elsewhere in the text. Since formulas are minimized and the worksheet is structured to take up to 40 years or 80 periods, look at the results of the matrix when the term of the bond is 40 years. Then change the term to a value like 10 years and the worksheet matrix “gets messy” and you have problems finding the end of the data. Then change to premium interest rates to discount interest rates – face value below market value, and look at the matrix and the journal entries. This same structure and problem exists in the “Bonds – Discount” worksheet because of the rigidity of the formulas – two, three, or four values and only one process....
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This note was uploaded on 09/19/2010 for the course ACCT 220 taught by Professor Ullmann during the Fall '10 term at University of Nebraska Kearney.

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