¶ … Issuance of Bonds Is as Follows:
Long-Term Debt
Cash
This is because we are adding cash to the balance sheet, which is an asset, and we are adding the liability of long-term debt as well. We put debits on the left hand side and credits on the right hand side.
For the interest expense it is as follows:
Cash
Interest Expense
This is because we are debiting cash, and crediting the interest expense column. The balance sheet shrinks as the result of this payment, so there is no offset on the balance sheet, but rather there is on the income statement. There are times when at the cutoff for an accounting period there is accrued interest, so in such instances that might be recorded differently.
An amortized bond is one that has been reduced in value for records on accounting statements (Investopedia, 2013). So this is a bond sold at a discount, and the discount amount is amortized to interest expense over the life of the bond. If we go with straight line, the journal entries would look like this:
Interest Expense
XXXX
Interest Payable
XXXX
Bond Discount
XXXX
In that situation, the interest payable and bond discount would...
Iacobucci and Triantis clarify that any type of corporation with legal personhood qualifies to issue debt as long as it can own property, enter contracts and be sued. Corporates can be issued in bearer form, where the holder of the actual certificate is required to update information periodically with the trustee or issuer, or as "registry" bonds, with the owner named but which carry no material coupons. "Book entry" bonds reside
Domestic debt is also needed for monetary policy purposes including for sterilizing inflows of foreign exchange." (Kahn, 2005) In addition bond markets assist in the provision of interest rates across the maturity spectrum and more efficient pricing of risk. By providing an alternative source of financing they reduce concentration of intermediation in banks. Because lending can be hedged in the bond market, banks have the ability to lend longer."
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