
Issue of bond at Discount:
When the coupon rate or contract rate of a bond is lower than the market interest rate, the bond is being issued at discount. If the bond is issued at discount, the selling price of the bond will be lesser than the face value of the bond.
Effective interest method:
Effective interest method aims at computing an accurate interest expense. In case of issue of bonds on discount, the carrying value of the bonds payable excluding the discount amortized is used to determine the interest expense during a particular period. Hence the interest expense increases as the carrying value of the bonds increase.
To determine:
1. Prepare the
2. Compute the total bond interest expense to be recognized over the bonds’ life.
3. Prepare an effective interest amortization table for the bonds’ first two years.
4. Prepare journal entries to record the first two interest payments.

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Chapter 14 Solutions
Fundamental Accounting Principles
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- Every transaction will affect how many accounts? Only One Only Two Two Or Morearrow_forwardIn addition to the standard chart of accounts for a specific industry, you will likely want to expand and/or modify the chart of accounts to fit your business. One tool that would be helpful in determining the accounts for your company would be your company's __________ chart.arrow_forwardThe chart of accounts is a listing of the accounts presently having balances in the general ledger. True Falsearrow_forward
- Answer for #2 and #3 cannot be the following:1100012748.14146928250561093509985arrow_forwardThe listing of all of the accounts available for use in a company's accounting system is known as the __________.arrow_forwardUnearned Revenues is what type of account? Asset Liability Stockholders' (Owner's) Equityarrow_forward
- Find the person's adjusted gross income using the followining data Income from Jobs Interest Misc. Income Dividend Income Adjustments to Income Adjusted Gross Income $23 comma 250 $326 $2547 $62 $2049 $ enter your response herearrow_forwardPlease see an attachment for details general accounting questionarrow_forward7. Assets are usually reported on the balance sheet at which amount? Cost Current Market Value Expected Selling Pricearrow_forward
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