230a_ch10 - Interest rate called stated rate or coupon rate Proceeds at issuance amount collected when bonds are issued Bond issued at par •

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CHAPTER 10: Bonds Balance Sheet: A = L + SE Assets Cash and Cash Equivalents Accounts Receivables Inventory Gross Plant, Property and Equipment (PPE) Less Accumulated Depreciation Net Plant Property and Equipment Intangibles Liabilities Accounts Payable Accrued liabilities Notes payable Current portion of long-term debt Long-term Debt Deferred taxes Bonds Income Statement: Rev – Exp = NI Revenue Gain on Sale of PPE Cost of Goods Sold Bad Debt Expense Depreciation Expense Amortization Expense Repair Expense Compensation Expense Interest Expense Income Tax Expense Loss on Sale of PPE Terms of Bond Contract Life: time period from date of issuance to maturity date Maturity date: date when dollar amount written on face of bond (face value) and final interest payment are paid to the bondholder. Face value (principal, par value, maturity value): dollar amount written on the bond certificate.
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Interest payment: interest rate stated on the bond multiplied by the face value.
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Unformatted text preview: Interest rate called stated rate or coupon rate. Proceeds at issuance: amount collected when bonds are issued. Bond issued at par • Stated rate = effective interest rate • Face value = proceeds at issuance Bonds issued at a discount • Stated rate < effective interest rate • Face value > proceeds at issuance Bonds issued at a premium • Stated rate > effective interest rate • Face value < proceeds at issuance Given: Face amount= 50,000 Annual stated rate = 10% Life of the bond is 2 yrs. Case 1: Bond proceeds= 50,000 Is the bond issued at par, a discount or a premium? Journal entry Case 2: Bond proceeds= 52,000 Is the bond issued at par, a discount or a premium? Journal entry Case 3: Bond proceeds= 48,000 Is the bond issued at par, a discount or premium? Journal entry Amortization of the discount or premium 1.Straight line Method 2. Effective interest method Early Retirement of Bonds...
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This note was uploaded on 03/02/2012 for the course BUISNESS 230a taught by Professor Stanley during the Fall '08 term at Sonoma.

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230a_ch10 - Interest rate called stated rate or coupon rate Proceeds at issuance amount collected when bonds are issued Bond issued at par •

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