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Accounting for Cash Discount on Sales Entries

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 …

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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 …

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Bond Discount Amortization Journal Entries & Example

In case of the example above, bond discount amortization in the first period is $5,430 (=$9,852,591×6.2%/2 - $10,000,000×6%/2) and it increases as the bond nears its …

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Present Value of a Perpetuity Formula Example

Example. Following the endowment example above, if the rate of return is 8%, we can find out the endowment value that can support $1 million payments each year: PV of …

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Gain or Loss on Early Retirement of Bonds

As the cash paid to redeem the bonds ($102,000) is lower than the carrying amount of the bonds ($105,000), there is a gain on retirement. This is because the company …

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Amortized Cost of Financial Assets and Liabilities

Example. The following example illustrates the application of effective interest rate method. On 1 January 2015, Drive, Inc. invested in 20,000 Company X bonds whose face …

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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 …

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