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| its issuer’s written promise to pay an amount identified as the par value of the bond with interest |
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· (also called face value) is paid at a specified future date known as the bond’s maturity date |
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| · Bonds don’t affect owner control· Interest on bonds is tax deductible· Bonds can increase return on equity |
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· Since bonds are bought and sold in the market, they have |
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| Authorization of bond issuances includes |
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| the number of bonds authorized, their par value, and the contract interest rate |
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| the legal contract between the issuer and the bond holders |
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| evidence of the company’s debt |
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| Bond certificate includes: |
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| o issuer’s name, par value, contract interest rate, and the maturity date |
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| monitors the bond issue and protects the bondholders’ interests |
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| Interest Payment of bond equation |
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| · Interest Payment = Bond Par Value * Stated Interest Rate * months (annual, semi annual) |
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On issue date _____Cash and _____ Bonds Payable (bonds at Par) |
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· On the first payment date: ____ Bond Interest Expense and _______ Cash (bonds at par) |
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· On the maturity date: _______ Bonds Payable and _______ Cash (bonds at par) |
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· On issue date:_______Cash, _______Bonds Payable, ________Discount on Bonds Payable (bonds at discount) |
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· To calculate the discount amortization |
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· To calculate Cash (actual amount of cash interest paid to the bondholders) |
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| Face value * Interest Rate * (semiannual, annual, etc.) |
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| · On the payment dates: _________Bond Interest Expense, _______Discount on Bonds Payable, _______Cash |
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| Bonds at premium are sold at a |
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· On issue date: debit _______, credit_______, credit ________
(Bonds at Premium) |
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| cash, Premium of Bonds Payable, Bonds Payable |
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· Interest Payment Date: debit ______, debit _______, credit______ |
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| Bond Interest Expense, Premium on Bonds Payable, Cash (actual amount of cash interest paid to the bondholders) |
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