Bond

Bond

1. Effective-interest method

   • Bond interst expense
     • Book value or present value of bond x market rate x x/12
   • minus
   • bond interest paid
     • Face value * stated rate

2. issurance

   • dr cash cr bonds payable
   • if not at the beginning
     • dr cash cr bonds payable and interest expense

3. 1st paybment

   • premium
     • dr int. exp. and bonds pay. cr cash
   • discount
     • dr interest exp cr bonds payable and cash
   • par
     • dr int. exp cr cash

4. Zero-Interest bearing notes

   • equals to present value
     • dr cash cr notes payable
   • interest exp.
     • dr int. exp. cr notes payable

5. property notes payble

   • issurance
     • dr building cr notes payable

6. settle by exchangin

   • asset
     • dr notes payable and loss on disposal of real estate
       • gain or loss of a property
         • compare the fair value and book value of the asset
     • Cr real estate and gain on extingishment of debt
       • gain or loss on extingishment of debt
         • compare the fair value of the asset and the book value of the debt
   • security
     • dr notes payable
     • cr share capital, share premium and gain on extinguishment of debt