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Bonds Payable (Measurement (Subsequent (Amortization Cost (Initial…
Bonds Payable
Measurement
Initial
Not designated at Fair Value through Profit or Loss
Measured at Fair Value - transaction costs
Bond issue cost shall be deducted from fair value at issue price
Designated and accounted for at Fair Value through Profit or Loss
Measured at Fair Value
Bond issue cost is expense immediately
Subsequent
Amortization Cost
Initial Measurement - principal payment (+) or (-) cumulative amortization
Fair Value through Profit or Loss
Recognized change in fair value
Presentation
Premium and Discount
Premium; added
Discount; deducted
Bonds payable as
Accounting for Bond Retirement
On Maturity Date
With Sinking Fund
Bonds Payable account and Interest Expense are debited while sinking fund is credited
Without Sinking Fund
Debits are the same with the other but the credit is cash
Prior to Maturity Date
Amortization up to the date of retirement
Determination of bond premium or discount balance.
Determination of interest until retirement date.
Computation of total cash payment by adding retirement price (certain percent in face value) and interest.
Determination of Carrying Amount ( face value- unamortized discount)
Determination of gain or loss: Gain if RP< CA; Loss, if RP>CA
Record the retirement
Accounting for Bond Issues
Two Approaches
Memorandum Approach
Records upon sale only
Journal Entry Approach
Records upon both authorization and sale
Cases of Bond Issuance
Issued at Face Value
No discount or premium
Issued above Face Value
Premium
Issued below Face Value
Discount
Other cases (see figure 2)
Definition
Features of Bond Isues
Bond Indenture
Bond Cetificates
Trustee
Registrar or Disbursing Agent
Types of Bonds
Term and Serial Bonds
Secured and Unsecured Bonds
Registered and Bearer Bonds
Other Types of Bonds