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Face Value Bonds definitions Flashcards

Face Value Bonds definitions
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  • Face Value
    Principal amount of a bond, typically $1,000, representing the amount repaid at maturity.
  • Stated Rate
    Interest percentage printed on the bond, used to calculate periodic interest payments to bondholders.
  • Market Rate
    Prevailing interest percentage in the market, used to determine a bond's selling price relative to its face value.
  • Par Value
    Condition where a bond is issued at an amount equal to its principal, with stated and market rates matching.
  • Discount
    Situation where a bond sells for less than its principal because the stated rate is below the market rate.
  • Premium
    Situation where a bond sells for more than its principal because the stated rate exceeds the market rate.
  • Interest Expense
    Cost recognized for using borrowed funds, calculated as principal times stated rate, affecting equity.
  • Bonds Payable
    Liability account representing the total principal owed to bondholders, always recorded at face value.
  • Interest Payable
    Liability for interest that has accrued but not yet been paid by the end of a reporting period.
  • Maturity Date
    Specific future date when the principal amount of a bond must be repaid to bondholders.
  • Principal Amount
    Original sum borrowed through a bond, which forms the basis for interest calculations and repayment.
  • Semiannual Interest
    Interest payments made twice per year, requiring calculation and journal entries every six months.
  • Journal Entry
    Accounting record documenting transactions such as bond issuance, interest payments, and principal repayment.
  • Liability
    Obligation to pay cash or provide services in the future, such as amounts owed to bondholders.
  • Accrued Interest
    Interest that has accumulated but not yet been paid, recorded as a liability at period end.