ACC 221 1st Edition Lecture 29 Outline of Previous Lecture Section 28 Chapter 7 8 Review Chapter 7 o Value Depreciation Chapter 8 o Removing Assets o Goodwill o Payroll o Sales Tax Outline of Current Lecture Section 29 Bonds Cont Bond Liability Face Value o Discount Bonds o Premium Bonds o Par Bonds o Maturity Payments o Semiannual Interest Current Lecture Section 29 Bonds Cont Bond Liability face value o Discount bonds Sold 290 000 6 annual rate less than face value Amortization schedule Face value interest rate 17 400 Payment promised in bond agreement 15 000 o Actual promised 2 400 o Add difference to bond liability Pay 15 000 now save extra 2 400 for last payment Record payment Dr interest expense 17 400 Cr Cash 15 000 Cr Bond payable 2 400 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 o o o o End of terms liability face value Premium Bond Bond liability 310 000 above face value 4 annual interest rate 310 000 4 12 400 Payment promised in bond agreement 15 000 o Actual promised 2 600 o Add difference to bond liability Pay 15 000 now reduce bond payable by 2 600 Record payment Dr interest expense 12 400 Dr Bond payable 2 600 Cr Cash 15 000 o By end of term liability face value of 300 000 Par Bond Sold 300 000 liability face value 300 000 interest rate amount originally promised in bond agreement All payments will be exactly 15 000 and there is no adjusting to get liabilities face value of 300 000 by end of term Record payment Dr bond payable 300 000 Cr Cash 300 000 Maturity payments Pay off bond payable with cash Will equal face amount of bond after amortization schedule Dr bond payable face value 300 000 Cr Cash face value 300 000 Amount paid amount borrowed actual interest Semiannual interest 300 000 at 10 over 2 years 300 000 face value 5 over 4 payments 300 000 5 15 000 Rest of actions same as other amortizations Stated interest rate 2 Term 2 Effective rate 2
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