Bonds

Question 1

Issuance of bonds payable

Answer 1

Bond price = Face value x Stated % OR present value of a bond
n = # of periods (multiply by 2)
i = market interest rate (divide by 2)

Question 2

Determining PV of a bond

Answer 2

1) Determine PV of FV
PV of FV = FV * PV factor 
FV = given or $1000 * # of bonds
2) Determine PV of interest payments
One interest payment * PV factor
One interest payment = FV x interest rate x 6/12

PV of a bond = 1+2

DR Cash
CR Bonds Payable (Do a different table for each diff % bond)

Question 3

Bond interest expense

Answer 3

carrying value x market rate x n/12

Question 4

Amortization of a bond (discount)

Answer 4

DR Bond Interest Expense
CR Bond Payable
CR Cash or Int. Payable (value is bond int expense - interest payment)

Question 5

Amortization of a bond (premium)

Answer 5

DR Bond Interest Expense
Dr. Bond Payable
Cr. Cash or Int. Payable (value is bond int expense - interest payment)

Question 6

Bond recall

Answer 6

1) Record interest expense and amortize recalled bonds
2) Calculate cash paid
3) Calculate carrying value of recalled bonds
4) Calculate gain/loss on recall

DR Bonds payable
DR Loss on recall/retirement or CR Gain on recall/retirement
CR Cash