Accounting for Cash Discount on Sales Entries & Example

Cash discount is a discount on credit sales offered by the seller as an incentive for the customers to settle their payable earlier than the final due date. Credit sales often have stipulations such as final due date for payment e.g. 30 days, 60 days etc. However, in order to push the customers to pay earlier than the due date instead of delaying payment as much as possible, sellers often

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Bond Discount and Premium Calculation & Example

Where c is the periodic coupon rate (i.e. annual coupon rate divided by coupon payments per year), F is the face value of the bond, r is the periodic bond yield and t is the total number of coupon payments till maturity.. The total amount of bond discount is directly proportional to the difference between the coupon rate and bond yield (i.e. market interest rate) and the time to maturity.

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Bonds Payable Journal Entries Examples

Cash/Bank. $10 M. Bonds payable. $10 M. The periodic interest payments equal the face value multiplied by the coupon rate applicable. In this scenario annual coupon rate is 8% but the bond will pay two payments each year so each periodic payment is $400,000 (= 8% ÷ 2 × $100 × 100,000). Bond interest expense. $0.4 M.

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Bond Price Definition, Formula and Example

Example 1: Bond with Annual Coupon Payments. Company A has issued a bond having face value of $100,000 carrying annual coupon rate of 8% and maturing in 10 years. The market interest rate is 10%. The price of the bond is calculated as the present value of all future cash flows: Price of Bond. = 8% × $100,000 ×. 1− (1+10%) -10.

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Amortized Cost of Financial Assets and Liabilities Example

Amortized cost is an investment classification category and accounting method which requires financial assets classified under this method to be reported on balance sheet at their amortized cost which equals their initial acquisition amount less principal repayment plus/minus amortization of discount/premium (if any) plus/minus foreign exchange differences (if any) less impairment losses (if …

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Yield to Maturity (YTM) Definition, formula and example

Yield to maturity (YTM) is the annual return that a bond is expected to generate if it is held till its maturity given its coupon rate, payment frequency and current market price.. Yield to maturity is essentially the internal rate of return of a bond i.e. the discount rate at which the present value of a bond’s coupon payments and maturity value is equal to its current market price.

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Second-Degree Price Discrimination Graph and Example

Second-degree price discrimination uses this insight in that it charges different prices for different number of units that a consumer buys. Examples of second-degree price discrimination include quantity discounts, when more units are sold at a lower per-unit price; and block-pricing, when the consumer pays different price for different blocks

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Present Value of a Perpetuity Formula Example

Perpetuity is a perpetual annuity, it is a series of equal infinite cash flows that occur at the end of each period and there is equal interval of time between the cash flows. Present value of a perpetuity equals the periodic cash flow divided by the interest rate.

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