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How to calculate
Present Value of a dollar
=(1+ market rate)^-term
Present Value of an annuity
=(1-present value of a dollar)/ market rate
Present Value of the Face Value
= present value of a dollar* face value
Present Value of the Interest Payments
= (face value * stated rate) * present value of an anuity
Journal Entry to record sale
Cash = face value - Discount + Premium
Discount/ Premium (if the present value of the bond is greater than the face value then it is a premium) = face value - present value of the bond
Amortization table
Interest = previous net present value * market rate
Cash = (face value * stated rate)
Amortization = interest - cash
Net Present Value = previous net present value + amortization
Interest Entries
Interest Expense = This years interest from amortization table
Dsicount on Bonds payable is the amortization amount from this year
Premium on Bonds payable is the amortization amount from this year
Cash is the cash amount.
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