ACC 221 1st Edition Lecture 27 Outline of Previous Lecture Section 26 Payroll Liabilities o Payroll taxes o Additional money owed to government o Full cycle of payroll Sales Tax Outline of Current Lecture Section 27 Intro to Bonds Long term liabilities o What are bonds o Compounding interest o Table Factors o Pay Demand o Journal Entries Current Lecture Section 27 Intro to Bonds Long term liabilities o What are bonds Bonds method of borrowing money with more than one lender o Compounding interest Borrow 10 000 6 annual interest outstanding three years Outstanding don t make payment interest or loan for specified number of years Year 1 10 000 6 600 10 600 owed Year 2 10 600 6 636 11 236 owed Year 3 11 236 6 674 16 11 910 16 owed o Dr Interest expense Cr Interest payable for each year o Table factors Determine the amount owed to bank Look up in table using the interest rate and number of periods Single payment paying a lump sum at one time Annuity stretching the payments overtime These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Have the future amount looking to get back to the present amount Face value cost of borrowing interest rate periods compounding o Pay Demand Consider pay demand at time of sale When setting bond to market if interest rate is lower the cost of borrowing is lowered making the total larger than the face value letting you borrow more o Borrowing on discount If interest rate increases you will borrow less o Borrowing on premium If interest rate decreases you will borrow more o Par borrowing If interest rate same on initial day of sale will not change o Journal entries Dr Cash Cr Bonds payable Use calculated selling price
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