Redeeming Bonds before Maturity definitions Flashcards
Redeeming Bonds before Maturity definitions
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Redemption Early repurchase of outstanding bonds by the issuing company, typically to reduce interest costs or respond to market rate changes. Carrying Value Book value of bonds, calculated as face value minus unamortized discount or plus unamortized premium. Repurchase Price Amount paid by a company to buy back its bonds from the market before maturity. Gain on Retirement Positive difference when bonds are repurchased for less than their carrying value, reported on the income statement. Loss on Retirement Negative difference when bonds are repurchased for more than their carrying value, reported on the income statement. Face Value Principal amount stated on the bond certificate, representing the amount to be repaid at maturity. Discount Difference when bonds are issued below face value, representing additional interest expense to be amortized. Premium Difference when bonds are issued above face value, representing reduced interest expense to be amortized. Amortization Systematic allocation of bond discount or premium over the bond’s life, affecting carrying value. Journal Entry Accounting record documenting the debits and credits involved in bond retirement transactions. Bonds Payable Liability account representing the total face value of bonds issued and outstanding. Market Rate Prevailing interest rate in the market, influencing bond prices and redemption decisions. Income Statement Financial report where gains or losses from bond retirement are recorded, impacting net income. Semiannual Interest Interest payments made twice a year to bondholders, affecting amortization schedules. Debit Balance Accounting term indicating an excess of debits over credits, typical for losses or discounts.
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