When the bonds are issued at discount, then the discount amount shall be transferred to account named Discount on issue of Bonds payable. This account will have a debit balance and this balance will be amortized over the life of the bonds on the basis of method used and will get reduced to Nil balance at the end of bond life or at maturity. This unamortized amount shall be reduced from the nominal value of bonds payable to compute the net amount of bonds payable to be shown in the Balance Sheet. The Nature of account of discount on issue of bonds payable and computation of balance of discount on issue of bonds need to be determined.
When the bonds are issued at discount, then the discount amount shall be transferred to account named Discount on issue of Bonds payable. This account will have a debit balance and this balance will be amortized over the life of the bonds on the basis of method used and will get reduced to Nil balance at the end of bond life or at maturity. This unamortized amount shall be reduced from the nominal value of bonds payable to compute the net amount of bonds payable to be shown in the Balance Sheet. The Nature of account of discount on issue of bonds payable and computation of balance of discount on issue of bonds need to be determined.
Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.
Chapter 14, Problem 12RQ
To determine
When the bonds are issued at discount, then the discount amount shall be transferred to account named Discount on issue of Bonds payable. This account will have a debit balance and this balance will be amortized over the life of the bonds on the basis of method used and will get reduced to Nil balance at the end of bond life or at maturity. This unamortized amount shall be reduced from the nominal value of bonds payable to compute the net amount of bonds payable to be shown in the Balance Sheet.
The Nature of account of discount on issue of bonds payable and computation of balance of discount on issue of bonds need to be determined.
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