Intro to Bonds

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Intro to Bonds


Lecture number:
27
Pages:
2
Type:
Lecture Note
School:
Miami University, Oxford
Course:
Acc 221 - Intro to Financial Accounting
Edition:
1
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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  Have the future amount, looking to get back to the present amount  Face value, cost of borrowing, interest rate, periods, compounding o Pay Demand ACC 221 1st Edition



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