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When Bonds Are Issued At A Discount The Bonds Payable Account Is Credited For The Proceeds From The Issue? Trust The Answer

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When bonds are issued at a discount, the bonds payable account is credited for the proceeds from the issue. If a long-term note payable has a stated interest rate, that rate should be considered to be the effective rate. Amortization of bond premium reduces the balance in bonds payable.If there was a discount on bonds payable, then the periodic entry is a debit to interest expense and a credit to discount on bonds payable; this has the effect of increasing the overall interest expense recorded by the issuer.When a bond is issued at a discount, the carrying value is less than the face value of the bond. When a bond is issued at par, the carrying value is equal to the face value of the bond. It is also the same as the price of the bond, and the amount of cash that the issuer receives.

When Bonds Are Issued At A Discount The Bonds Payable Account Is Credited For The Proceeds From The Issue?
When Bonds Are Issued At A Discount The Bonds Payable Account Is Credited For The Proceeds From The Issue?

Table of Contents

Is discount on bonds payable a credit?

If there was a discount on bonds payable, then the periodic entry is a debit to interest expense and a credit to discount on bonds payable; this has the effect of increasing the overall interest expense recorded by the issuer.

Which is true when a bond payable is issued at a discount?

When a bond is issued at a discount, the carrying value is less than the face value of the bond. When a bond is issued at par, the carrying value is equal to the face value of the bond. It is also the same as the price of the bond, and the amount of cash that the issuer receives.


FA 41 – Bonds issued at a Discount

FA 41 – Bonds issued at a Discount
FA 41 – Bonds issued at a Discount

Images related to the topicFA 41 – Bonds issued at a Discount

Fa 41 - Bonds Issued At A Discount
Fa 41 – Bonds Issued At A Discount

How do you account for discount on bonds payable?

The amount of this discount is stored in a contra liability account, which is paired with and offsets the bonds payable account. The discount is amortized to interest expense over the remaining life of the bond, which means that the issuer recognizes an increased amount of interest expense over the life of the bond.

When a bond is sold at a discount the cash received is?

Terms in this set (24) T/F: When a bond is sold at a​ discount, the cash received is less than the present value of the future cash flows from the​ bond, based on the market rate of interest on the date of issue.

Is discount on bonds payable a debit or credit?

The account Discount on Bonds Payable (or Bond Discount or Unamortized Bond Discount) is a contra liability account since it will have a debit balance.

What does a discount on bonds payable mean?

A discount on bonds payable, also known as a bond discount, happens when a bond’s par value is greater than its carrying value or issuing price. A bond discount is the difference between these two figures. The reason a discount on bond payable occurs is the stated rate of interest is below the market rate of interest.

How does the account discount on bonds payable or bond discount operate what type of account is it?

Discount on Bonds Payable is a contra liability account that is debited for the purpose of offsetting a credit on a liability account Bonds Payable and reporting the net book value, or carrying value, of an entity’s outstanding bonds.


See some more details on the topic When bonds are issued at a discount the bonds payable account is credited for the proceeds from the issue? here:


Accounting for Bonds Issued at a Discount – Finance Strategists

As this entry illustrates, Cash is debited for the actual proceeds received, and Bonds Payable is credited for the face value of the bonds.

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BONDS PAYABLE (INTERMEDIATE ACCOUNTING 2 … – Chegg

The total effective interest is equal to the amount of the discount plus the total cash interest paid. An amortization schedule for bonds issued at a premium. A …

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What is discount on bonds payable? | AccountingCoach

Discount on bonds payable (or bond discount) occurs when a corporation issues bonds and receives less than the bonds’ face or maturity amount. The root cause of …

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Accounting for bonds – AccountingTools

The accounting for bonds includes its initial issuance, interest payments, amortization, and eventual redemption by the issuer.

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When bonds are issued at a discount what happens to the carrying value and interest expense over the life of the bonds?

A discount or premium depending on the maturity date. If bonds are issued at a discount, over the life of the bonds, the carrying value will: Increase.


How to Amortize a Bond Discount

How to Amortize a Bond Discount
How to Amortize a Bond Discount

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How To Amortize A Bond Discount
How To Amortize A Bond Discount

What does the balance in the discount on bonds payable account represent quizlet?

The account Discount on Bonds Payable actually represents interest expense and will be amortized over the life of the bond. A loss contingency is recorded in the accounting records when it is probable that a loss has been incurred and the amount of the loss is known.

What type of account is discount on bonds payable and what is its normal balance quizlet?

Discount on bonds payable is a contra liability account, because it is contrary to the normal credit balance. Its normal balance is Debit balance. Discount on bonds payable account is added to determine the carrying amount.

How should discount on bonds payable be reported on the financial statements premium on bonds payable?

Discount (premium) on bonds payable should be reported in the balance sheet as a direct deduction from (addition to) the face amount of the bond. Both are liability valuation accounts.

When bonds are sold at a discount and the effective interest method is used?

The effective interest method is an accounting practice used to discount a bond. This method is used for bonds sold at a discount or premium; the amount of the bond discount or premium is amortized to interest expense over the bond’s life.

When bonds are issued at a discount below face amount the carrying value and the corresponding interest expense increase over time?

When bonds are issued at a discount (below face amount), the carrying value and the corresponding interest expense increase over time. Interest expense on bonds payable is calculated as the: Carrying value times the market interest rate. A bond issue with a face amount of $500,000 bears interest at the rate of 7%.

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Is Accounts Payable a debit or credit?

In finance and accounting, accounts payable can serve as either a credit or a debit. Because accounts payable is a liability account, it should have a credit balance. The credit balance indicates the amount that a company owes to its vendors.


Video 1 – Bonds Issued Between Interest Payment Dates

Video 1 – Bonds Issued Between Interest Payment Dates
Video 1 – Bonds Issued Between Interest Payment Dates

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Video 1 - Bonds Issued Between Interest Payment Dates
Video 1 – Bonds Issued Between Interest Payment Dates

What type of account is bonds payable?

What is Bonds Payable? Bonds payable is a liability account that contains the amount owed to bond holders by the issuer. This account typically appears within the long-term liabilities section of the balance sheet, since bonds typically mature in more than one year.

Why is bond discount a contra liability?

It is not classified as a liability since it does not represent a future obligation. Examples of contra liabilities include a discount on notes or bonds payable. Contra liabilities hold a debit balance. Contra liability accounts are not as popular as contra asset accounts.

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