Learning Team Reflection

Teresa Watkins
January 9, 2014
ACC 291
Michael Bluvas


















There are three stages in which bonds are recorded. Acquisition is the first, interest is the
second, and sale is the third. To record a journal entry for the first stage, the costs of the bond
and brokerage fees are listed under debt investments as a debit and as a credit under cash.
To record bond interest, the initial costs of the purchased bonds are multiplied by the
annual interest which equals to the annual amount of paid interest. In the event its semiannual,
to get the amount for half the year multiply the amount by .5. Your total is listed as a debit under
cash and as a credit under interest revenue.
When using the effective interest method the amortization of premiums and bond interest
results in the interest expense equal to the percentage of the bonds. To bond interest expense and
interest paid has to be calculated to compute the amortization amount of the bonds. The value of
the bonds is multiplied by the interest rate to figure the bond interest expense. Multiplying stated
value of bonds by contractual interest rate is how the bond interest rate is calculated. The
amortization amount is the difference of bond interest expense and bond interest paid. In journal
entry the discount on bonds payable is credited as cash, the discount bonds will debt bond
interest expense. The journal entry for premium bonds will debt bond interest expense and
premium on bonds payable list as a credit under cash.