Lesson 11 attachment papers and Long term Liabilities
hunch over from interest rates when fastening will sell at discount, face value, or a premium
expect value if coupon rate = market place rate
Discount if coupon rate < market rate
Premium if coupon rate > market rate
Make entries for bond issue. Make entry for bond interest payments and amortization
Cash
alliance Payable
Face Value
$100,000
stick by sequel Cost
Cash
$
Sold at Premium
Cash
$ 105,242.14
Premium on Bond Payable
100,000.00
Bond Payable
$2,500
$2,500
Bond have-to doe with Expense $
Cash
5,000.00
Bond Issue Expense
Bond Issue Cost
$416.67
Bond Issue Expense
Bond Issue Cost
5,242.14
100,000.00
$2,500
$2,500
Bond Interest Expense $
Premium on Bonds Payable
$
5,000.00
Cash
$416.67
$
Bond Issue Cost
Cash
$
$
4,209.69
790.31
$
5,000.00
$416.67
$416.67
Sold at Discount
Cash
$ 95,082.68
Discount on Bond Payable
$
4,917.32
Bond Payable
$ 100,000.00
Bond Issue Cost
Cash
$2,500
$2,500
Bond Interest Expense $
5,704.96
Discount on Bond Payable
$
Cash
$
704.96
5,000.00
Bond Issue Expense
Bond Issue Cost
$416.67
$416.
67
Amortization is the bond issue personify divided the years it will be amortized
Financial education effects of all of the above
Balance Sheet
Income Statement
Cash Flow
decrese in cash
Bond Retirement on Dec 31 2007 & settle in
bond payable
Gain on bond debase
back
Less chief financial officer due
to buy back
Coupon Expiration
decrease in
cash &
decrease in
e quity
decrease in net
i ncome due to
coupon pmt
Less CFO due
to coupon pmt
Repayment of the principal
decrese in cash
& decrease in
bond payable
N/A
Less CFO due
to principal
repayment
CFO = cash from operating activities
Definitions of zero-coupon bonds
A zero-coupon bond (also called a discount bond or thickheaded discount bond) is a bond bought at a expenditure lower than its face
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