Lesson: Bond Issuance at Discount

In this lesson, Nick Palazzolo, CPA, delves into the intricacies of bond issuance at a discount. With Stark Inc. as a case study, he showcases how to calculate the issue price and record the initial journal entry when bonds are sold below their face value. Nick emphasizes the importance of understanding the difference between the cash received and the bonds payable account, and introduces the straight-line method of bond discount amortization. He further explains how to record periodic interest payments and the adjustment of the discount on bonds payable over time, simplifying the nuances of the amortization process. By using comparison and clear-cut examples, Nick ensures that the concept of bringing a bond's carrying value back up to its face value over the life of the bond is well comprehended.