How to Amortize a Bond Discount
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- Опубліковано 5 лют 2025
- 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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I watched multiple videos to get an understanding of bonds issued at premium and discount - I just could not understand the concept clearly enough, until I watched your two videos of amortizing bonds at discount and premium. You explain very well, hats off to you !
Thank you!
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.
This video was a game changer for me when it came to understanding how to amortize bonds. I've been so frustrated the entire day until this video. Thank you!
I'm so glad it finally clicked! You should be proud of yourself for sticking with it!
This video explained the effective interest method 10 times more clearly than this insanely expensive text book I have ever could. Thank you!
You're very welcome!
A few years back I was an accounting student at uni and learned about amortised cost for bond. Now I'm preparing for my CPA exam and just want to watch a video to help me quickly pick up all the concepts and logic. Watched 3 other similar videos but none was as clear and thorough as yours. Much appreciated!
Thank you, I hope you ace the CPA exam!
I have never understood how bonds worked. Your videos helped me finally learn this, thank you so much!!!
Happy to help!
really glad for this! our modules didn't provide step-by-step procedures that led me here, thankyou for this!
Who else is taking financial accounting course??
Me and my finals is tomorrow HAHA
Me
@@ImANightCreature how was the ur exam
man, im at the ned of my semester, but I'm glad I found this in time for studying over winter break and prepare for spring semester.
Thank you so much for making these videos. You are saving my bacon as I study.
Happy to help!
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.
Edspira, I just wanted to say thank you for everything you've done with your channel. It has been tremendously helpful for me and I'm sure so many others.
Thank you for the encouragement, I really appreciate it. I'm glad you find the videos helpful!
Thank you so much for posting this and dumbing down all the information for me.
Hi Edspira, This is an excellent knowledge sharing content which helped me to grasp the calculation of bond's carrying value(PV of bond), amortization of discount on issue of bonds in a span of 20 minutes. I spent almost 15 years for getting this clarity. Thanks a ton. God bless your noble service.
I'm so happy to hear that you've grasped this concept! Thank you for your support and encouragement 😀
Yes a lifesaver. Thank you soo much. I understand this so much better and with good notes I am confident I can really learn and recreate this. Can't thank you enough.
Thank you so much, Read chapter 17 intermediate accounting multiple times, looked at the PP but finally everything is so well explained in this 18-minute video.
Bond discounts are an interesting concept. This video is super helpful!
This might be one of your best videos! Thank you!
Thanks Elizabeth!
Is that your picture? You’re fkn hot!
Thank you for your video, I am online accounting student, and I learned the bond amortization from your video.
That's great to hear! I'm happy you were able to learn it!
I'm currently studying for the CFA L1 exam and nothing helped me so much understanding the reason for different rates (market interest rate vs coupon rate) and why you amortize a bond. Been looking and reading for hours but your video talks all about it and it's very easy to understand. Thank you so much for saving me precious hours!
This is a complicated concept for newbies like me. You explained it better than anyone else man!
Thank you!
studying for cpa and needed this visualization and reminder for bonds... great job
So glad he decide to write out how he got the present values!
Sir, you make, by far, the best accounting video lectures I've come across. Thank you, thank you, thank you.
I really love how you teach, you are the best! your explanation is so clear.
Very concise and clear, you made it look so easy. I learned a lot the past 19 minutes. Thanks
Outstanding lecture. Like the other commenter said...this video is stripped down into very easy to understand ideas. I was so confused with my college instructor, but this clear things up very well. Going to check out your other videos!
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!
thank you so much. you really helped me. so much easier to understand than my textbook. you the man!!!!!!!!
Thank you for your videos....they have helped me so much during my classes for my accounting degree.
This help so much in trying to understand the math behind the journal entries. I wish my textbook would go this in depth. Thank you!
ABSOLUTELY WOW!!!! YOU ARE AN AMAZING TEACHER!!! THANK YOU SO MUCH
You are so welcome!
Thank you sir! MUCH better than reading the textbook
thaaaaaaaaaaaaank youuu soooooooooooooooo much. you saved me. i couldnt solve this for hours and i found your video ad did it for 20 minutes)))))) thank youuuuu
Awesome!!
Thank you so much for all the videos you make, it makes understanding all these concepts so much easier! Best videos I've learned from!
You are way of delivering the lecture just awesome sir!!!
Thank you so much! I'm glad to hear that you're enjoying the videos!
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.
Michael thank you so much for these videos! You are a lifesaver!
No problem my friend! Best wishes!!
So the values of" Discount Amortized"--Are they being paid back to investor at the maturity ?If not ,what's happening to Discount Amortized ?
can someone explain that funky formula @7:59 the PV int Pmnt and how I can type that into excel manually without using the formula???
Thanks for the video! Bonds clearly explained finally !
Thanks!
thank you !!!! This was really helpful. Thank you for being thorough it made it easier to understand and keep up!
So easy to understand. Thank you.
Hello, your video is very helpful. I am midway through and I have a question about the 6:00 minute mark. To get the new interest rate, you have to always divide by 2 if the question says it semiannual? Thank you
You are a great teacher or professor
thank you so much I wasted hours trying to figure it out from the book
Many thanks for the effort that went into these videos! Very very helpful!
You sir are a legend
Thank you!
It is very use full. Much better then Mac Graa Hill Education system.
Nice Job, I appreciated the refresher on present value calculation!
Thanks Robert!
Thankyouu for this video i did my task very well. 🥰🥰🥰
This was a great help. Thank you for clear explanation.
Thank you sooo much! your explanation rocks.
Glad it was helpful!
honestly this helped me better than becker. I've always had issues with bonds or any debt instruments
thank you sm! you're my accounting god!
How did you calculate the answer at 7:58 I tried calculating it over and over making changes and corrections to how I rendered it into my calculator and I even used google lens and STILL couldn't figure out how you got that answer.
THANK YOU SO MUCH PROFESSOR ur a lifesaver! could you do a video on semi annual premium amortization schedules? how does it change?
Doctor Professor McLaughlin sir, do you have a video on recalling bonds prior to their maturity dates? I can't seem to find one.
thanks for these videos you give me hope
Bless your soul, you saved my life!
My textbook completely skipped this step...
thank you very much. this concept are able to understand from this video
yea you helped me more that ever thanks so much have a good day
hi there, love your videos, very helpful. Just wondering what would the journal entry look like for the retirement of the bond and what would be debited and credited?
I'm stuck at 7:49...present value of interest payment? What does it mean... Guess I have to find another video first... Before understanding amortizing discount
Excellent! do you have a video on convertible bond accounting?
Thank you. Please keep posting more videos.
Right now I'm teaching 5 classes, so I don't have the time to put up more content. But, stayed tuned... I'll be releasing many more videos this summer! Thanks for watching.
In my class we used PV Factor and PVAnn to get carrying value (which I did not understand, which is why I'm here). I imagine on the exam I'll need to calculate PV Factor and PVAnn. How are these related to PV Principal and PV Interest? Btw, your method makes a lot more sense to me!
Hi- what is the reasoning behind using market rate for PV of principal?
You are the best 💛
16:46 best point made!!!!
Can you clarify why you use market rate instead of stated rate? is it because u give a discount so you use market?
What if the market rate changes? Would one have to adjust for the change in market interest?
I have a question involving lower credit loans being treated as OID bonds... An interest rate is no given (market or coupon rate) and the model is set up accretion not amortization. The purpose of this exercise is to calculate the minimum amount of required capital to achieve a desired credit designation. Any guidance in this matter will be greatly appreciated.
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?
thanks good job
Welcome 👍
Thank you! Thank you thank you thank you!
Thanks for the video!
One question that haunted me is: why do we add the amount of discount amortized to calculated the carrying value? Thanks in advance
Why the value of the bond is more valuable after it has already payout interest?
Great explanation. Thanks
Thank you!!! So what figures are then represented on SoFP and SOP
Love your videos!!!
Thank you so much, you're a lifesaver!
Happy to help! Take care and best wishes :)
How do I calculate the PV int PMT on a Casio calculator?
Thank you very much, this was a great video
excellent! thank you!
Glad you enjoyed it!
Life saver thanks a bunch
Thank you for your videos. So does that mean that in addition to the R30k we need to also pay the discount amortization every time as well?
Thank you, again!
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
Thanks so helpful
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?
It would! The reason we don't care about that is because it is fluctuating after the sale of the bond. The difference between the market rate and the stated rate is only relevant when the purchaser of the bond is considering their options. The adjustment (discount) is only made to bring the effective rate of the bond (the purchaser's return on investment) up to par with the rest of the market. Once the sale has been made, it's like any other agreement and is locked in place no matter what happens to the market.
Awesome videos. Thanks so much!
Is this considered the effective interest method?
thanks a bunch man, this really helped.
No problem. Thanks for watching!
I did watch your time value of money tutorial but Im curious as to why 1 is always used in the formula
PERFECT, I LIKE YOUR CLASS
Shouldn’t the present value of the principal use 8% and 3 periods? The interest is paid semiannually, but the principal is not.
thank you!!
You're welcome!
im having trouble inputting the present value interest payments into the calculator
this was so helpful omg thank you
Happy to help!
Hi Sir. Thanks for this video. I just wanna ask if there is any short method available, in determining carrying value without creating a table. Hoping for your response.
Great question! Unfortunately I don't know of a good shortcut. If anyone else knows of a good shortcut, I'd love to hear it!
Hi there! I just want to share the shortcut in determining the carrying value throughout the years. You will have to use a scientific calculator, but any calculator with an "answer" function will do. ^_^
1. Input the carrying value in the calculator, then press "=".
2. Press "Ans" , then the "*" button and input the amount of (1+effective interest rate) then less the cash paid.
If we will be using the example given above, it will look like this:
Ans x 1.04 - 30000
3. Press "=", you will get the carrying value for the 1st year.
4. Press "=" again, then you'll get the carrying value for the 2nd year.
5. Continually press "=" until you get the face value. ^_^
Hope this helps!
Gotcha! thanks!