Bonds payable are set up when a company issues bonds to make a cash. When a company issues bonds, then the company is a borrower. This act of issuing the bond establishes a responsibility on the company. Commonly, it falls the company in the long-term class of responsibilities.

Bonds Payable Templates

Bonds payable depend on the difference between its coupon rate and the market yield on the issuance of the bonds. When a bond is issue, the company notes the face value (nominal value of a security mention by the issuer) of the bond. They receive cash for the fair value of the bond, and the positive or negative difference is note as a premium on bonds payable.

What is Bond Amortization Calculator?

When a bond is sold at a premium (discount), the amount of the bond discount must be amortize to interest expense over the payment period up to a maximum term.

The debit amount in the account premium on Bonds Payable will be stimulate to the account Interest Expense. The amortization will cause that each payment period’s interest expense to be greater than the amount of interest paid during each of the years that the bond is dominant.

Bond Amortization Calculator will calculate the straight-line method bond amortization and also produce an effective interest method amortization schedule setting out the premium amortization for each interest payment period.

Finance Calculator Excel Includes Formulas

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Zero Coupon Bond Price

It is referred to as a pure discount bond or simply discount bond. Zero Coupon Bond is a bond that does not pay coupon payments and rather pays one lump sum at the decide time and date. There are no periodic interest payments and the only cash flow which is the face value of the bond receive by the investor at the maturity date. In order to receive a return, a zero-coupon bond must be deliver to investors at a great discount.

Calculate the Bond Price

For the bond price calculation, determine the interest paid by the bond, find the present value of the bond and calculate the present value of interest payments. Then the bond price is the sum of the present value of the bond repayment that is due at its maturity in five years and the present value of the related stream of future interest payments.

What is Straight Line Bond Amortization?

The straight-line bond amortization is use to calculate the amount of premium (amount receive for the bond that is an addition of the bond’s face amount) on bonds payable to be amortize to the interest expense account for each accounting period.

Bond Amortization and Effective Interest Method

This best method for amortizing a premium or discount bond. It is the effective interest rate method or the effective interest method. Under the effective interest rate method, the amount of interest expense in a given accounting period associates with the book value (net asset value of a company) of a bond at the start of the accounting period. As a bond’s book value increases, the amount of interest expense increases.

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