Bonds Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond. Effective interest rate of amortization bond Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate. To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

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Answer 1

Question

Chapter 10, Problem 10.18BE

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

(b)

To determine

To explain: The reason why interest expense is greater than interest paid.

(C)

To determine

To explain: The reason why interest expenses will increase each period.

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Answer 2

Question

Chapter 10, Problem 10.18BE

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

(b)

To determine

To explain: The reason why interest expense is greater than interest paid.

(C)

To determine

To explain: The reason why interest expenses will increase each period.

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Answer 3

Question

Chapter 10, Problem 10.18BE

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

(b)

To determine

To explain: The reason why interest expense is greater than interest paid.

(C)

To determine

To explain: The reason why interest expenses will increase each period.

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Answer 4

Question

Chapter 10, Problem 10.18BE

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

(b)

To determine

To explain: The reason why interest expense is greater than interest paid.

(C)

To determine

To explain: The reason why interest expenses will increase each period.

Expert Solution & Answer

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Answer 5

Chapter 10, Problem 10.18BE

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

(b)

To determine

To explain: The reason why interest expense is greater than interest paid.

(C)

To determine

To explain: The reason why interest expenses will increase each period.

Answer 6

Chapter 10, Problem 10.18BE

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

Answer 7

Chapter 10, Problem 10.18BE

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record payment of interest, and amortization of discount on bonds at the end of period 1 for Incorporation R.

Answer 8

(b)

To determine

To explain: The reason why interest expense is greater than interest paid.

Answer 9

(b)

To determine

To explain: The reason why interest expense is greater than interest paid.

Answer 10

(C)

To determine

To explain: The reason why interest expenses will increase each period.

Answer 11

(C)

To determine

To explain: The reason why interest expenses will increase each period.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 10 - Prob. 1Q Ch. 10 - Prob. 2Q Ch. 10 - Prob. 3Q Ch. 10 - Prob. 4Q Ch. 10 - Prob. 5Q Ch. 10 - (a) Identify three taxes commonly paid by...Ch. 10 - Prob. 7Q Ch. 10 - Prob. 8Q Ch. 10 - Contrast these types of bonds: (a) Secured and...Ch. 10 - Prob. 10Q

Solution Summary: The author explains the effective interest rate method of amortization, which increases the amount of interest expenses reported each period.

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To explain: The reason why interest expense is greater than interest paid.

To explain: The reason why interest expenses will increase each period.

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