BU127 Chapter Notes - Chapter 11: Debenture, Interest Expense
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BU127 Full Course Notes
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Bond principal amount payable at maturity date basis for computing periodic cash interest payments also called par value, face amount, and maturity value. Stated rate rate of interest per period specified in bond contract each periodic interest payment equals principal * stated rate. Debenture unsecured bond no assets are pledged to garuntee repayment. Secured bond specific assets are pledged to garuntee repayment. Callable bond issuer can call for an early retirement to this bond (buyout) Convertible bond can be converted to common shares of the issuer. Indenture bond contract that specifies legal provisions of a bond issue. Interest expense for bonds bonds can be sold at premium, par, or discount. Present value, interest discount < market value (par) < premium. Discount on bonds payable (xl) is debited for discount amount, and cash is debited for rest. Effective-interest method amortizes bond based on effective-interest rate (market rate of interest)
