T bonds do not pay interest iinstead they offer a

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Unformatted text preview: do not pay interest. IInstead, they offer a return in the form of a deep discount from the orm of a deep discount from the fface amount. ace amount. The Straight­Line Method – A Practical Expediency 14-9 Using the straight-line method of amortizing discounts and premiums, the discount in the earlier illustration would be allocated equally to the 6 semiannual periods (3 years): $33,367 ÷ 6 periods = $5,561 per period At Each of the Six Interest Dates Masterwear (Issuer) Interest expense Discount on bonds payable Cash United (Investor) Cash Discount on bond investment Investment revenue 47,561 5,561 42,000 42,000 5,561 47,561 14-10 Debt Issue Costs Legal Legal Accounting Accounting Underwriting Underwriting Commission Commission Engraving Engraving Printing Printing Registration Registration Promotion 14-11 Long­Term Notes Company (Borrower) Promissory Note (Note Payable) Bank Property, goods, or services. The liability, note payable, is reported at its present value, similar to the accounting for bonds payable. 14-12 Insta...
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