Table of Contents
What is the interest expense on a bond?
Bond interest expense is the aggregate interest expense incurred during a reporting period for an organization’s bonds payable. This expense includes the amortization of any premium or discount on issued bonds for the reporting period, which is based on the price at which they were sold to investors.
How do you calculate interest expense on bonds using effective interest method?
Interest expense is calculated as the effective-interest rate times the bond’s carrying value for each period. The amount of amortization is the difference between the cash paid for interest and the calculated amount of bond interest expense.
How do you calculate interest expense on a bond using the straight line method?
This method attributes equal interest expense to every accounting period until the bond matures. To calculate the interest for each period, simply divide the total interest to be paid over the life of the bond by the number of periods, be it months, quarters, years or otherwise.
When the effective interest method is used the interest expense for the period is calculated by multiplying the?
amortization
When the effective interest method of amortization is used, the amount of bond interest expense for a given period is calculated by multiplying the face interest rate by the bond’s carrying value at the beginning of the given period. 7.
Is interest expense an expense account?
First, interest expense is an expense account, and so is stated on the income statement, while interest payable is a liability account, and so is stated on the balance sheet.
How do you record interest on a bond?
To record bonds issued at face value plus accrued interest. This entry records the $5,000 received for the accrued interest as a debit to Cash and a credit to Bond Interest Payable. To record bond interest payment. This entry records $1,000 interest expense on the $100,000 of bonds that were outstanding for one month.
How do you calculate straight line amortization and interest expense?
The straight-line amortization method is the simplest way to amortize a bond or loan because it allocates an equal amount of interest over each accounting period in the debt’s life. The straight line amortization formula is computed by dividing the total interest amount by the number of periods in the debt’s life.
When the effective-interest method is used the amount of bond discount amortized each interest period is equal to the?
Question: Under the effective-interest method,the amount of bond discount amortized each interest period is equal to the: O A amount of interest expense less the cash paid for interest.