How should the amortization of bond discount on long-term debt be reported in a statement of cash flows prepared using the indirect method? a. As a financing activities outflow. b. As a financing activities inf
When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest. a. True b. False True or False: Discount on bonds is an additional cost of borrowing and should be recorded as interest expen...
Thestraight-line methodis a linear method that is the simplest to use. Using the straight-line method, bond amortization results in bond discount amortization values that are equal throughout the term of thebond. Effective-interest methods This is the method typically used for bonds sold at a ...
What does it mean to amortize the premium, discount, and issue costs on bonds payable? How do you account for bond issue costs? How do you record bonds that are issued? What is the face value of a bond payable? Why does a bond's price decrease when interest rates increase?
Calculate the effective interest method of amortization for the bond sold on discount: Step 1: Enter Values in the Journal Record the transactions on 1st Jan 2018. The company received a cash of amount $94,757.86. Debits increase assets: so, debit Cash $94,757.86. ...
For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then each year 1/10 of the original amount of discount will be debited to Bond Interest Expense and credited to Discount on Bonds Payable each year. If the amount of discount is significant, ...
The amortization of the discount each interest period impacts the amount of cash paid each interest period. a. True b. False Amortization is the allocation process of writing off bond premiums and discounts to interest expense over the life of the...
A more specialized case of amortization occurs when a bond purchasedat a premiumis amortized down to itspar valueas the bond reaches maturity. When a bond is purchased at a discount, the discount is reduced each period in a process known asaccretion. The concept is again referring to adjustin...
How do you amortize discount on bonds payable? Define amortization schedule. How do bonds work? Why is Amortization a source of cash flow? How do you record bond with discount in accounting? How do you calculate amortization of intangible assets? How does issuing bonds affect the balance sheet...
The discount on a bond payable becomes a reduction in interest expense over the life of the bonds. (a) True (b) False. Amortization of discount on bonds payable results in interest expense that is less than the actual cash outflow. True or false? The ...