📘 Chapter 9 – Long-Term Liabilities (Bonds & Notes)
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8 Terms
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Discount
market rate > stated rate → bond sells below face
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Premium
market rate < stated rate → bond sells above face
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Issued at Par
market rate = stated rate → sells at face
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Effective Interest Method
is used to calculate interest expense over time
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Cash Interest Payment:
Face Value×Stated Rate (per period)
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Interest Expense:
Carrying Value×Market Rate (per period)
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Amortization
Premium: Cash − Interest Expense
Discount: Interest Expense − Cash
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Bond Price:
PV of Face Value+PV of Annuity of Interest Payments
Note 
Flashcards (94)