[Anonymous]

Hi all,

I am having a huge difficult to understand questions which involves Bonds. Premium, someone pay for a bonds for more os less then the carrying amount, and other stuffs are being really confusing for me. Does somente could indicate a material (such as bonds for dummies) for reading/explanation? Tks!!

[Anonymous]

You might understand bonds better if you understand what's going on with them. That is what it took for me to understand them. As bonds take money and time to get printed, the market is fluctuating. Meaning other people are selling the same darn thing while yours are being printed. So you get them all printed up which takes TIME and you offer them at say 10 percent. So in other words, if someone buys your bond you will give them 10 percent interest on their money – maybe annually, maybe semi annually. Then you look at the market and realize everyone is selling the same bond for 8 percent. Great. That means everyone is going to flock to you, because your stated interest is HIGHER than what people could get paid in interest on the market. So that's a premium.
But say the market was 12 percent. No one in their right mind is going to want a 10 percent return. So you better discount your stated rate. If you were offering 100,000 in bonds to begin with, you're going to have to take less now.
After understanding that, I watched youtube until I was blue in the face. Have this down for the test including journal entries for investor and invested.
I watched a guy by the name of larry lawther I think his name was on YouTube.
And also, there's the effective method and straight line method of bonds. You need to know both.

[Anonymous]

Thank you very much!!

[Mike J]

You may also want to think (don't try to memorize) about the transaction involved.

eg Am I getting cash? That's a debit. Am I expensing something? Debit an expense account.

In a discount situation, there is more interest involved on both sides–debtor and creditor. So there is only one debit entry for the Debtor–Int Exp–and two credits–Cash & Discount on Bonds– For the creditor it's essentially the opposite–one credit for the Creditor–Int Rec–and two debits–Cash & Discount on Bonds.

If you're asked to REtire something, think REverse. REverse the entry.

So basically if you know COLD the natural balances of accounts, that should help you out of a lot of jams on exam day. You can also spend more brainpower on memorizing the rules–eg IFRS vs GAAP.

AUD - 90
BEC - 79
FAR - 77
REG - 77

They don't trust JUST ANYBODY to count beans

[Anonymous]

check out this, https://www.another71.com/cpa-exam-forum/topic/far-bonds-bonds-bonds-and-bonds/
this will make your life easy!

[Author]

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