# Is the sum of the interest payments plus the bond discount?

Contents

## What is the sum of the interest payments plus the bond discount?

(3.) Par = Contract rate is equal to market rate. Total bond interest —– is the sum of the interest payments plus the bond discount.

## How do you record interest payments on a bond?

To record bonds issued at face value plus accrued interest. This entry records the \$5,000 received for the accrued interest as a debit to Cash and a credit to Bond Interest Payable. To record bond interest payment. This entry records \$1,000 interest expense on the \$100,000 of bonds that were outstanding for one month.

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## Is the issuer’s written promise?

A(n) bond is the issuer’s written promise to pay an amount identified as the par value. The par value is paid at a specified future date.

## When a bond contract rate is less than the current market rate on the date of issuance The bond will be sold at a N?

If the contract rate is less than the market rate, the bond will sell at an amount less than face (this is known as a discount). If the contract rate is greater than the market rate, the bond will sell at an amount greater than face (this is known as a premium).

## When the market rate is 8% a company issues \$50000 of 9% 10-year bonds?

When the market rate is 8%, a company issues \$50,000 of 9%, 10-year bonds dated January 1, 2017, that mature on December 31, 2026, and pay interest semiannually for a selling price of \$60,000.

## When a bond is sold at a premium the carrying value will?

When a bond is issued at a premium, the carrying value is higher than the face value of the bond. 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.

## What is the amount of bond interest expense recorded on the first interest payment date?

\$140,700 x 4% = \$5,628 bond interest expense on first payment date.

## What is the interest payment on a bond called?

The interest payment (the coupon) is part of the return that bondholders earn for loaning their funds to the issuer. The interest rate that determines the payment is called the coupon rate. The initial price of most bonds is typically set at par, usually \$100 or \$1,000 face value per individual bond.

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## What a firm will pay when its bonds are retired?

When debt is retired before it matures, interest rates may have changed since the debt was issued. The result is that the firm must pay an amount reflecting the new market rate of interest to retire the debt. … The price the firm will have to pay to retire the debt thus declines below book value, resulting in a gain.

## Which of the following is a disadvantage of bond financing?

Question: A disadvantage of bond financing is: Bonds do not affect owners’ control. Interest on bonds is tax deductible. Bonds can increase return on equity It allows firms to trade on the equity. Bonds pay periodic interest and the repayment value maturity.

## Is Bond payable the same as normal?

Similar to a bond payable but is normally transacted with a single lender such as a bank. Record initially as a single payment note. Payments include interest expense accruing to date of payment plus principal. … Debit to Bond Interest Expense, Credit to Cash.

## When a company issues bonds that do not pay periodic interest the bonds are called?

When a company issues bonds that include no periodic interest payments, the bonds are called zero-coupon bonds.

## What are the contract rate and the market rate for bonds?

The bond’s contract rate is another term for the bond’s coupon rate. It is what the issuing company uses to calculate what it must pay in interest on the bond. The market rate is what other bonds that have a similar risk pay in interest.

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## When the market rate of interest is less than the contract rate for a bond the bond will sell for a premium?

As shown above, if the market rate is lower than the contract rate, the bonds will sell for more than their face value. Thus, if the market rate is 10% and the contract rate is 12%, the bonds will sell at a premium as the result of investors bidding up their price.

## When the bonds are sold for more than their face value the carrying amount of the bond is equal to?

Question: When bonds are sold for more than face value, the carrying value of the bonds is equal to face value face value plus the unamortized discount face value minus the unamortized premium face value plus the unamortized premium Contribution margin is: the excess of sales revenue over variable cost another term. 