Bond Premium Amortization Fields Company sold an issue of $800,000, 10%, 10-year bonds for $852,032 on March 1. The interest is payable semiannually on September 1 and March 1. The market rate of interest at the time the bonds were issued was 9%. Sept. 1 Paid the first semiannual interest payment and amortized the bond premium, using the effective interest method. Dec. 31 Made the adjusting entry for bond interest accrued and amortization of the bond premium from September 1. (Hint: Use the effective interest rate for the four-month period from September 1–December 31.) Jan. 2 Reversed the adjusting entry for bond interest accrued and bond premium amortization as of December 31. Mar. 1 Paid the second semiannual interest payment and amortized the bond premium. Journalize the above transactions (round all amounts to the nearest dollar).
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Bond Premium Amortization
Fields Company sold an issue of $800,000, 10%, 10-year bonds for $852,032 on March 1. The interest is payable semiannually on September 1 and March 1. The market rate of interest at the time the bonds were issued was 9%.
| Sept. 1 | Paid the first semiannual interest payment and amortized the bond premium, using the effective interest method. |
| Dec. 31 | Made the |
| Jan. 2 | Reversed the adjusting entry for bond interest accrued and bond premium amortization as of December 31. |
| Mar. 1 | Paid the second semiannual interest payment and amortized the bond premium. |
Journalize the above transactions (round all amounts to the nearest dollar).
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