Bonds

Question 1

Carrying Value

Answer 1

Net Amount of Face Value +/- any premium/discount made

Question 2

Coupon Payment

Answer 2

Interest Payment

Question 3

Face Value

Answer 3

$ amount of the Bond

Question 4

Issue Bonds (par value)

Answer 4

Dr Cash at Bank

Cr Bonds Payable

Question 5

Issue bonds at premium

Answer 5

Dr Cash at Bank
Cr Premium on Bonds payable
Cr Bonds Payable

Question 6

Issue Bonds at discount

Answer 6

Dr Cash at Bank
Dr Discount on Bonds Payable
Cr Bonds Payable

Question 7

Issue Rate < Market Rate

Answer 7

Discount

Question 8

Issue Rate > Market Rate

Answer 8

Premium

Question 9

Issue Rate = Market rate

Answer 9

at Par

Question 10

Interest expense use issue or market rate?

Answer 10

Market

Question 11

Retirement of Bond via Maturity

Answer 11

Dr Bonds Payable

Cr Cash at Bank

Question 12

Retirement of Bonds before maturity

Answer 12

Dr Bonds payable
Dr Premium on Bonds payable (or Cr Discount on Bonds Payable)
Dr Loss (or Cr Gain)
Cr Cash at Bank

Question 13

Calculating issue price of bond

Answer 13

Table 2, i = x, n = y, z -> zface value = b
Table 4, i = x, n = y, a-> acoupon = c
Issue Price = b+c

*n is no. of periods, i is the interest per period

Question 14

Bond quote 105 for 20,000 bond

What is the market Price?

Answer 14

21,000