Question

What is the main difference between notes payable and bonds payable?

What is the main difference between a bond and a share of stock?

What does it mean to issue bonds at

Par?

Discount?

Premium?

What is the contract rate and the market rate for bonds?

How do you compute total bond interest expense when a bond is sold at a discount? Explain your answer.

How do you compute bond interest expense when a bond is sold at a premium? Explain your answer.

What accounts are affected when recording the issue date of a discount bond? What accounts are affected when recording interest and amortization? Which accounts are credited and which accounts are debited when creating journal entries?

What accounts are affected when recording the issue date of a premium bond? What accounts are affected when recording interest and amortization? Which accounts are credited and which accounts are debited when creating journal entries?

What accounts are affected when a bond matures? Which accounts are credited and which accounts are debited when creating journal entries?

**PLEASE ANSWER ALL OR DO NOT ANSWER*

Answer 1

1- Notes payables are generally short term in maturity while bonds are long term in maturity (ii) Bonds are considered as financial security while notes payables are not (3) Bonds payables are regulated by laws while notes payables are not.

2- Bonds are considered as creditor to the company while share are the part of ownership. Bonds are issued with fixed maturity and rate of return while shares are issued with no maturity and no fixed return

3- When bonds are issued at par - means bonds are issued at par

when bonds are issued at discount- means bonds are issued at price lower than par value

when bonds are issued at premium - means bonds are issued at price higher than par value

4- Contract rate is the coupon rate at which annual payment of coupon is calculated on face value while market rate is the rate at which fresh and new bonds are issued

5- How do you compute total bond interest expense when a bond is sold at a discount? Explain your answer - when calculate interest expense in case bonds are issued at discount, in this case interest expense would be calculated by value of interest to be paid in cash plus discount to be amortized

6- How do you compute bond interest expense when a bond is sold at a premium? Explain your answer-  when calculate interest expense in case bonds are issued at premium, in this case interest expense would be calculated by value of interest to be paid in cash less premium to be amortized

7- What accounts are affected when recording the issue date of a discount bond? What accounts are affected when recording interest and amortization? Which accounts are credited and which accounts are debited when creating journal entries

cash, discount on bonds payable, bonds payable

Interest expense, discount on bonds payable, cash

1- Debit cash Debit discount on bonds payable credit bonds payable

2- Debit interest expense credit cash credit discount on bonds payable

What accounts are affected when recording the issue date of a premium bond? What accounts are affected when recording interest and amortization? Which accounts are credited and which accounts are debited when creating journal entries

cash, premium on bonds payable, bonds payable

Interest expense, premium on bonds payable, cash

1- Debit cash credit premium on bonds payable credit bonds payable

2- Debit interest expense debit premium on bonds payable   credit cash

What accounts are affected when a bond matures? Which accounts are credited and which accounts are debited when creating journal entries

cash, bonds payable

Debit bonds payable credit cash