How to Amortize a Bond Discount

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This video explains how to account for bonds issued at a discount using the effective interest rate method for bond discount amortization.

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33 COMMENTS

  1. Thanks so much for posting this! I just couldn't grasp this in my online course I've been frustrated for days and this makes sense now. My question is – there is a constant market rate used of 4% in this example to determine the discount amortized, but in reality wouldn't that market rate fluctuate too as time goes on?

  2. i was reading the chapter of bonds the teacher gave us and i have not understood anything.
    but when i wachted your video everything is clear now. thank you so much for this lesson.

  3. I disagree with your present value of principal calculation over 8% annual interest. (1+4%) to the power of 6 is not equal to (1+8%) to the power of 3. The market rate is "annual" 8%. So you have to use (1+8%) to the power of 3 in your formula @ 6 minute 40 sec of your video.

  4. Question: from the power point that my teacher is using for class there is another column within the table called Discount Account Balance. I noticed you don't have that in your table, so is it something that should be ignored?

  5. As a student in a Masters of Accounting program, your videos have literally been a lifesaver. I know comments can go unnoticed but your videos are the perfect examples and perfect way of explanation. Thank you for taking time to put these videos out.

  6. How the company decides 6% interest for the offering, based on the WACC . ? And why same company has different bond offerings at different rates? With same maturity?

  7. Thank you. Im doing a problem with intercompany bonds (parent-sub) and needed a refresher course on bond discounts. You just saved me lots of time!

  8. I Wish my instructor had explained these like you did. First time I have understood what is happening and how to calculate each step. Thanks for a great video.

  9. thank you! do i need to make any more journal entries after the last interest expense 1/1/20? or is that the last and final one

  10. Can you clarify why you use market rate instead of stated rate? is it because u give a discount so you use market?

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