Reply to a Classmate

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After you have completed the initial post, you will need to reply to at least one classmate. The reply may contain any of the following:

Reinstate briefly, what your classmate has discussed

Extend your classmate's posting with additional information

If available, suggest alternatives to your classmate's opinion. Bonds are issued by companies to raise long$-$term capital and can be sold at par, a premium, or a discount depending on the market interest rate compared to the bond$$s contract rate. For instance, if a company issues a $$100,000$ bond at $8\%$ when the market rate is also $8\%,$ it is issued at par, and the journal entry is: Dr$.$ Cash $$100,000$ and Cr$.$ Bonds Payable $$100,000.$ If the market rate is higher or lower, the present value of the bond is determined by discounting future interest and principal payments using the market rate. When recording interest payments, the effective interest method calculates interest expense as the bond$$s carrying amount multiplied by the market rate, resulting in changing amortization amounts over time. For example, with a discount, the carrying amount increases; with a premium, it decreases. In contrast, the straight$-$line method spreads the premium or discount evenly over the bond$$s life, which is simpler but less accurate. $($Warren$,$ Reeve, & Duchac, Accounting, $27$th ed$.,2022).$