Acct 221 1st Edition Lecture 19 Outline of Last Lecture 1 Time value of Money 2 Interest a Single b Compound 3 Time Value Tables Outline of Current Lecture 1 Bonds a Bonds payable b Future value c Cash Flows Current Lecture Bonds Bond Payable Always on book for face value Bond holders receive maturity Bonds sell at par 100 of face value Less than par bond sells for less Known as a discount More than par bond sells for more because a higher interest rate is offered Known as a premium Ex Issued 300 000 8 bonds at 103 What are the cash proceeds Credit bonds payable 300 000 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 Debit cash 309 000 Debit bond premium interest 9 000 Cash proceeds 309 000 Otherwise known as the issue price we debit bond premium instead of interest because of the matching principle Future value sold at issue price Future value less than 100 discount Future value more than 100 premium Cash Flows Pay Interest payments annually or semiannually Pay Face value at maturity
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