Issuer's Accounting for debt at interest payment: example
{"Image DocumentName": "Issuer\u2019s Accounting for debt at interest payment: example", "Image ImageDescription": "Principal =  1,000; Coupon interest rate = 10%, annual payments; Maturity = 5 years. Issued at par. For simplification, assume each interest payment occurs on the last day of the fiscal year. Issuer\u2019s balance sheet when interest paid: Decrease cash and increase interest expense (which reduces owners\u2019 equity). Issuer\u2019s journal entry: Debit interest expense, credit cash. LOS. Determine the initial recognition and measurement and subsequent measurement of bonds. LOS. Discuss the effective interest method and calculate interest expense, amortization of bond discounts/premiums, and interest payments. Pages 606\u2013618. The issuer\u2019s balance sheet when interest paid: Decrease cash and record an interest expense (an interest expense appears as a negative because it reduces owners\u2019 equity; expenses reduce net income, which, in turn, reduce retained earnings). The issuer\u2019s journal entry: Debit interest expense, credit cash. ASSETS = LIABILITIES + OWNERS\u2019 EQUITY. \u2013  100. Cash. Interest expense. Copyright \u00a9 2013 CFA Institute.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}