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11
How do you calculate the Interest Exp for bonds issued at a Discount?
Given:
Life: 5 yrs
FV: 1,000,000
Rate: 10%
Issuing Price of Bond: 926,405
Given:
Life: 5 yrs
FV: 1,000,000
Rate: 10%
Issuing Price of Bond: 926,405
FV
+
Interest Payments for 5 yrs (1,000,000 x 10% x 5)
=
Total to be Paid
-
Amt. received from Bondholders
=
Total Bond Interest Exp.
Example:
1,000,000
+
500,000
=
1,500,000
-
926,405
=
573,595
+
Interest Payments for 5 yrs (1,000,000 x 10% x 5)
=
Total to be Paid
-
Amt. received from Bondholders
=
Total Bond Interest Exp.
Example:
1,000,000
+
500,000
=
1,500,000
-
926,405
=
573,595
Flashcard info:
Author: savhighsmith
Main topic: Accounting
Topic: General
School / Univ.: UGA
City: Athens
Published: 01.05.2010