Amortizing The Discount On Bonds Payable

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Amortization of discount on bonds payable — AccountingTools

The bonds have a term of five years, so that is the period over which ABC must amortize the discount. There are two ways for ABC to amortize the discount. Since the discount is so small, it can amortize the amount on a straight-line basis, and simply debit $20,000 to interest expense in each successive year, with the following entry:

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Bond Discount with Straight-Line Amortization ...

Discount on Bonds Payable with Straight-Line Amortization. Over the life of the bond, the balance in the account Discount on Bonds Payable must be reduced to $0. Reducing this account balance in a logical manner is known as amortizing or amortization. Since a bond's discount is caused by the difference between a bond's stated interest rate and ...

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Amortized Bond Definition - Investopedia

Amortized Bond: An amortized bond is a financial certificate that has been reduced in value for recording on financial statements. An amortized bond is one where the discount amount being ...

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Amortizing Bond Discount Using the Effective Interest Rate ...

The effective interest rate is multiplied times the bond's book value at the start of the accounting period to arrive at each period's interest expense. The difference between Item 2 and Item 4 is the amount of amortization. The following table illustrates the effective interest rate method of amortizing the $3,851 discount on bonds payable:

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Chapter 14 Flashcards | Quizlet

Determine the bond discount or premium amortization next by comparing the bond interest expense with the interest to be paid. ... When a business enterprise enters into what is referred to as off-balance-sheet financing, the company ... Discount on bonds payable is a contra liability account and premium on bonds payable is an adjunct account.

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How to Amortize a Bond Discount

This video explains how to account for bonds issued at a discount using the effective interest rate method for bond discount amortization. Edspira is your source for business and financial education.

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