Acct. 221 1st Edition Lecture 19Outline of Last Lecture 1. Time value of Money2. Interesta. Singleb. Compound 3. Time Value Tables Outline of Current Lecture 1. Bondsa. Bonds payableb. Future value c. Cash FlowsCurrent 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 300,000These 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
View Full Document