10
Chapter
10
Reporting
and
interpreting
Bonds
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
McGraw­Hill/Irwin
Copyright © 2014 by The McGraw­Hill Companies, Inc. All rights reserved.-1
Characteristics
of
Bonds
Payable
Two
types
of
cash
payment
in
the
bond
contract:
1.
Principal.
2.
Cash
interest
payments.
Bond Terms
1.
Principal,
par
value
and
face
value
2.
Contract,
stated,
or
coupon
rate
of
interest
3.
Market,
yield,
or
effective-
interest
rate
10-2
Reporting
Bond
Transactions
Present Value of the Principal
(a single payment)
+
Present Value of the Interest Payments (an annuity)
=
Issue Price of the Bond
Interest
Bond
Accounting for
Rates
Price
the Difference
Stated
Market
Bond
Par Value
There
is no difference
Rate
Rate
Price
of the
Bond
to account for.
Stated
Market
Bond
Par Value
The
difference
is accounted
Rate
Rate
Price
of the
Bond
for as a
bond discount.
Stated
Rate >
Market
Rate
Bond
Price
>
Par Value
of the Bond
The difference is accounted
for as a bond premium.
10-3