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Discount on Bonds definitions Flashcards

Discount on Bonds definitions
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  • Discount on Bonds Payable
    Contra liability account representing the difference between a bond's face value and its lower issuance price.
  • Face Value
    Principal amount of a bond that is repaid at maturity and used to calculate interest payments.
  • Stated Rate
    Interest rate printed on the bond certificate, used to determine periodic cash interest payments.
  • Market Rate
    Prevailing interest rate in the market for similar bonds at the time of issuance.
  • Carrying Value
    Net amount at which a bond is reported on the balance sheet, calculated as face value minus unamortized discount.
  • Amortization
    Systematic allocation of the bond discount to interest expense over the bond's life.
  • Straight-Line Method
    Technique that spreads the total bond discount evenly across all interest periods.
  • Interest Expense
    Total cost recognized each period, combining cash interest paid and amortized discount.
  • Interest Payable
    Liability account reflecting interest owed but not yet paid at the end of an accounting period.
  • Bonds Payable
    Long-term liability account showing the total face value of bonds owed by the issuer.
  • Principal Repayment
    Payment of the bond's face value to bondholders at maturity, eliminating the liability.
  • Contra Liability Account
    Account that offsets a related liability, reducing its carrying amount on the balance sheet.
  • Par Value Bonds
    Bonds issued at a price equal to their face value, typically when stated and market rates match.
  • Journal Entry
    Formal accounting record documenting the financial effects of bond transactions, including issuance, interest, and repayment.
  • Semiannual Interest
    Interest payments made twice a year, requiring adjustment of annual rates and payment calculations.