Effective Interest Rate Method (Discount Amortization Schedule) How To Setup & Use

Описание: How to use and setup a debt amortization schedule using the effective interest rate method (effective interest method), example is for a bond issued at a discount (present value less than face value of bond) using the effective interest rate method, bond has two cash flows, (1) face value or principal amount paid at maturity and (2) interest payment (usually semi annual) based on the stated rate of interest on the bond, example shown as a cash flow diagram, present value (PV) what its worth when issued (issue date) based on discounting bonds cash flows (maturity value + interest payments) back to issue date using the market rate of interest, comparing the bonds present value to its future value (face value) determines the discount amount on the bond (amount the PV is less than its face value), the discount amount has to be amortized over the life of the bond using an amortization schedule, detailed example showing how to setup amortization schedule and use the schedule to amortize the bond discount, detailed calculations with accounting journal entries (T accounts)on balance sheet template for bond payable, discount on bond payable, interest payments, interest expense (market rate x carrying value of bond), amortized interest expense (interest payment - interest expense), add amortized discount to the bonds carrying value to determine the bonds new carrying value (bond amortization), detailed calculations and accounting by Allen Mursau