Acct 221 1st Edition Lecture 20 Outline of Last Lecture 1 Bonds a Bonds payable b Future value c Cash Flows Outline of Current Lecture 2 Bonds a Effective Rate b How to find issue price c Interest payments Current Lecture Bonds Stated Rates vs Market Value Stated rate bond rate Market value effective rate To determine effective rate 1 Determine if sold at premium or discount 2 Find present value of principal of bond Face value value from PV of 1 table 3 Find present value of future cash flow aka interest 4 Amortize the discount or premium to expense Interest Payments Present value of an ordinary annuity of 60 000 for 10 periods interest rate of 8 60 000 6 7101 402 606 Present value of single amount of 1 mill 10 years in the future at 8 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 1 000 000 46319 463 190 Add together 402 606 463 190 The bond was issued at 865 000 or at 86 5
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