Long Term Debt

Question 1

Calculate Present Value

Answer 1

PV = 1/((1+i)^n) * the face amount
i is effective annual rate (whatever is stated)
n is the periods of the effected annual rate

Question 2

Calculate Present Value of Annuity

Answer 2

PVofA = (1-(1/((1+i)^n)))/i * interest payment
i is the effective annual rate
n is the periods of the effective annual rate

IE: 1-(1/(1+4%)^6)))/4%

Question 3

Calculation of Unamortized Premium

Answer 3

Bond Issue Price - Bond Face Amount

Question 4

Calculate Bond Issue Price

Answer 4

Present Value of the Payment at effect annual rate (Use Present Value for the calculations)

and

Present Value of Interest Payment at effect annual rate (Use Present Value of Annuity for the Calculation)

Question 5

Journal Entry:

Issuance of Bond

Answer 5

DB Cash
CR Bonds Payable
CR Bond Premium (DB Bond Discount)

Question 6

Journal Entry:
Interest Payment of Bond
&
Amortization of Premium (Discount)

Answer 6

DB  Interest Expense
CR Cash
&
DB Bond Premium (CR Bond Discount)
CR Interest Expense 

OR
DB Interest Expense
DB Bond Premium (CR Bond Discount)
Credit Cash