In short
Serial bonds mature in installments over a series of years rather than all on one date. Each maturity is effectively a separate bond, with its own price and discount or premium.
Key takeaways
- The installment due within the next year is reported as a current liability.
- Discount or premium is amortized with the effective interest method.
- Term bonds, by contrast, all mature on the same date.
Where it's tested
FAR: Long-Term Debt (Bonds & Notes) — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Bonds with a face amount of $500,000 and an 8% annual coupon are issued for $470,000 when the market rate is 9%. Using the effective interest method, what is interest expense for the first year?