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Unformatted text preview: Over the term of the bonds, the balance in Discount on Bonds Payable will decrease annually by the same amount until it has a zero balance at the maturity date of the bonds. Thus, the carrying value of the bonds at maturity will be equal to the face value of the bonds. Alternative Terminology The amount in the Discount on Bonds Payable account is often referred to as Unamortized Discount on Bonds Payable . Preparing a bond discount amortization schedule, as shown in Illustration 10A-2 , is useful to determine interest expense, discount amortization, and the carrying value of the bond. As indicated, the interest expense recorded each period is $10,400. Also note that the carrying value of the bond increases $400 each period until it reaches its face value of $100,000 at the end of period 5. Illustration 10A- Bond discount amortization schedule...
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