Face Value Bonds definitions Flashcards
Face Value Bonds definitions
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Face Value Principal amount of a bond, typically $1,000, representing the amount repaid at maturity. Stated Rate Interest percentage printed on the bond, used to calculate periodic interest payments to bondholders. Market Rate Prevailing interest percentage in the market, used to determine a bond's selling price relative to its face value. Par Value Condition where a bond is issued at an amount equal to its principal, with stated and market rates matching. Discount Situation where a bond sells for less than its principal because the stated rate is below the market rate. Premium Situation where a bond sells for more than its principal because the stated rate exceeds the market rate. Interest Expense Cost recognized for using borrowed funds, calculated as principal times stated rate, affecting equity. Bonds Payable Liability account representing the total principal owed to bondholders, always recorded at face value. Interest Payable Liability for interest that has accrued but not yet been paid by the end of a reporting period. Maturity Date Specific future date when the principal amount of a bond must be repaid to bondholders. Principal Amount Original sum borrowed through a bond, which forms the basis for interest calculations and repayment. Semiannual Interest Interest payments made twice per year, requiring calculation and journal entries every six months. Journal Entry Accounting record documenting transactions such as bond issuance, interest payments, and principal repayment. Liability Obligation to pay cash or provide services in the future, such as amounts owed to bondholders. Accrued Interest Interest that has accumulated but not yet been paid, recorded as a liability at period end.