1 / 12

BOND

BOND. A written promise wherein the borrower promises to pay to the holder of the bond: The face value (par value) of the bond at the maturity date. Interest on the face value at a specified rate on specified dates. TERMINOLOGY. Stated Rate of Interest

ocean
Télécharger la présentation

BOND

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. BOND • A written promise wherein the borrower promises to pay to the holder of the bond: • The face value (par value) of the bond at the maturity date. • Interest on the face value at a specified rate on specified dates.

  2. TERMINOLOGY • Stated Rate of Interest • Also known as contract rate, nominal rate, or coupon rate. • Rate of interest that is printed on the face of the bond. • Remains the same for the entire life of the bond issue. • Used to determine the amount of periodic interest payments.

  3. TERMINOLOGY • Market Rate of Interest • Also known as effective rate or yield rate. • The rate of interest which investors in the market are willing to accept on bonds of this particular risk category on any given date. • The rate of interest an investor can earn on a particular bond issue by paying a certain price for it.

  4. BONDS ISSUED AT A DISCOUNT • Presentation on December 31, 19X1 Balance Sheet:Long-term Liabilities: Bonds Payable $1,000 Less: Discount on Bonds Payable 213 $787 • Book Value = Bonds Payable - Unamortized Discount • At the maturity date, the book value of the bonds will equal the face value.

  5. BONDS ISSUED AT A DISCOUNT

  6. BONDS ISSUED AT A DISCOUNT

  7. BONDS ISSUED AT A DISCOUNT

  8. BONDS ISSUED AT A PREMIUM • Presentation on December 31, 19X1 Balance Sheet:Long-term Liabilities: Bonds Payable $1,000 Add: Premium on Bonds Payable 248 $1,248 • Book Value = Bonds Payable + Unamortized Premium • At the maturity date, the book value of the bonds will equal the face value.

  9. BONDS ISSUED AT A PREMIUM

  10. BONDS ISSUED AT A PREMIUM

  11. BONDS ISSUED AT A PREMIUM

  12. BOND ISSUE COSTS • APB Opinion No. 21 • Examples: • Legal and accounting fees • Printing costs • Registration fees • Defer; record as Deferred Bond Issue Costs • Amortize (to bond interest expense) over life of bond issue by the straight-line method

More Related