Example of Premium on Bonds Payable. If $500,000 of 10-year bonds, with interest payable semiannually are sold for $494,040 based on (1) the present value of $500,000 due in 20 periods at 5% plus (2) the present value of twenty $25,000 payments at 5%, the nominal or contract rate and the market rate of interest for the bonds are both 10%. A bond with a stated interest rate of 8% is sold. Equity account. Premium on bonds payable. D. may buy back bonds from the investors. Since a credit balance is the normal balance for a liability account, the account Premium on Bonds Payable cannot be referred to as a contra account. Premium on bonds payable is a. a contra account. A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The Premium on Bonds Payable account is a(n): Adjunct liability account. If the bonds were issued at a premium, this indicates that. Which of the following is a contra account a Premium on bonds payable b from MIS 201 at Saudi Electronic University Created by. (10) Premium on bonds payable is a. a contra account. Show transcribed image text. B) is a contra account. Understand how bonds are presented on a balance sheet, whether issued at par, a premium, or discount. Premium on bonds payable definition bond issued at premium accounting detailed with balance sheet cliffs notes. The excess $100 is classified as a premium on bonds payable, and is amortized to expense over the remaining 10 year life span of the bond. C) is considered to be a reduction in the cost of borrowing. Premium on Bonds Payable: A) has a debit balance. STUDY. If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is. Which of the following describes the characteristics of a convertible bond? Both discount on bonds payable and premium on bonds payable are valuation accounts. c. debited to a deferred charge account and amortized over the life of the bonds. Terms in this set (22) Bond. These bonds will sell at a price that is: A Equal to $500,000 B. The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest. b. reported as a reduction of the bond liability. Which of the following statements is true? Rich Company issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. Premium on bonds payable is the excess amount by which bonds are issued over their face value. To determine the six-month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond. Although it may not seem so, the $103,769 is the $105,000 from above and the $3,679 is the $5,000 from above. What is Premium on Bonds Payable? Learn. All about Bonds! C. increases the cash interest payment. Discount On Bonds Payable Quizlet. A contra account is an account that is deducted on another account, and has a normal balance that is opposite to its related account. 1. Discount on bonds payable is a contra-liability account, which is subtracted from bonds payable. b. reported as a reduction of the bond liability. These differences are a result of a financial concept called the time value of money, which states that $1 today is worth more than $1 in the future. 16. Contra asset account. true false. c. debited to a deferred charge account and amortized over the life of the bonds. 37. If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The premium on bonds payable A. C. Earnings before interest and taxes divided by interest expense. CODES (1 months ago) A discount on bonds payable quizlet - Updated Daily 2020. Use the straight-line method to account for a bond issued at a discount. A. The company's fiscal year ends https://quizlet.com/498765008/accounting-chapter-9-flash-cards When graphing the carrying value of a premium bond vs the par value of a premium bond, the lines intersect at the maturity date of the bond. d. is deducted from bonds payable … The entry eliminates the $9,800 book value of the bonds from the accounts by debiting Bonds Payable for $10,000 and crediting Discount on Bonds Payable for $200 (remember, discount on bonds payable is a contra-liability account and has a normal debit balance). Face amount, interest rate, interest payment dates, maturity dates. The current market rate of interest is 11%. B. Bonds Payable. QUESTION 1 The premium on bonds payable is a contra liability account. Write. Issuing Bonds Payable at a Premium After posting, the bond accounts have the following balances: Smart Touch Learning reports these bonds payable on the balance sheet as follows: Straight-Line Amortization of Bond Premium The beginning premium is $4,100, and there are 10 semiannual interest periods during the bonds’ five-year life. Which of the following is not a method of disclosing pertinent information? D. Accumulated depreciation. D. Face value less any unamortized discount or plus any unamortized premium. Match. The periodic interest payment on a bond is based upon the market rate of interest. debited to a deferred charge account and amortized over the life of the bonds. Premium on Bonds Payable a. has a debit balance. The difference is premium/discount on bonds payable, which will impact the bonds carrying value presented in the balance sheet. 37. Bonds payable should be reported as a long-term liability on the balance sheet of the issuing corporation at: A. 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