Bonds and LT Debt

Question 1

Calculate Bonds Payable, Net of discount

Answer 1

Face- bond Discount

Question 2

JE to record issuance of Bonds between interest dates with formulas

Answer 2

DR Cash (Face + interest payable - Discount)
DR Bonds Discount (Face - Discount %)
CR Bonds Payable (Face)
CR interest Payable (face * rate * time)

Question 3

Calculate Interest Income

Answer 3

Effective Interest Rate * net proceeds * time

Question 4

When the effective Interest method is used for bonds issued at a premium, interest Payable is calculated by multiplying

Answer 4

Face value * contractual rate

Question 5

Columns L to R of amortization schedule in order

Answer 5

Interest paid, interest expense, premium amortized, unamortized premium, carrying value

Question 6

Formula for interest paid column in amort schedule

Answer 6

Face * Contract Rate

Question 7

Formula for interest expense column in amort column

Answer 7

Market rate * carrying value

Question 8

Formula for premium/discount amortized column in bond amort table

Answer 8

Interest paid- interest expense

Question 9

Formula for unamortized/premium column in bond amort table

Answer 9

Old unamortized premium/discount - premium/discount amortized goes to 0

Question 10

Formula for carrying value column in bond amortization table

Answer 10

Add premium amortized, subtract Discount should move towards bond face

Question 11

Discount amortization is reported as

Answer 11

Interest expense

Question 12

Formula for Gain on retirement formula

Answer 12

Carrying Value (Face+premium(-Discount)
-call price (face * Discount/premium %)

Question 13

Formula for Bond Liability

Answer 13

Carrying value(face * disc/premium)
- BIC

Question 14

Formula for Revenue for the buyer with a discount

Answer 14

Interest paid(face * stated) +Discount