principal

Examples of principal in the following topics:

• Accounting for Interest Earned and Principal at Maturity

  • At maturity, firms should debit cash and credit held to maturity investments the balance of the principal payment.
  • When money is borrowed, interest is typically paid to the lender as a percentage of the principal, the amount owed to the lender.
  • The percentage of the principal that is paid as a fee over a certain period of time (typically one month or year) is called the interest rate.
  • Nominal, principal, par, or face amount —is the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term.
  • If a company paid $10,000 for 8% bonds, a journal entry is required to record the payment of principal at maturity.

• Dollar-Value LIFO

  • Simple interest is interest on principal only.
  • The principal of $1,000, plus $2 \cdot $120$, is equal to $1240.
  • Compound interest is interest on principal and on interest of prior periods.

• Types of Bonds

  • Bonds may be registered as to principal (or face value of the bond) or as to both principal and interest.
  • Most bonds in our economy are registered as to principal only.
  • For a bond registered as to both principal and interest, the issuer pays the bond interest by check.
  • The bondholder receives the full principal amount on the redemption date.

• Bond Valuation Method

  • The present value of a bond is composed of two components; the principal and the interest payments.
  • The discount rate for both the principal and interest payment components is the market rate when the bond was issued.

• Notes Payable

  • The terms of a note usually include the principal amount, interest rate (if applicable), parties involved, date, terms of repayment (which may include interest), and maturity date.
  • The note payable amount can include the principal as well as the interest payment amounts due.

• Bonds Payable and Interest Expense

  • The borrower promises to pay (1) the face value or principal amount of the bond on a specific maturity date in the future, and (2) periodic interest at a specified rate on face value at stated dates, usually semiannually, until the maturity date .
  • Valley made the required interest and principal payments when due.

• Bonds Issued at Par Value

  • The affected accounts will be interest expense and cash, and the journal entry will be as follows: Interest Expense $70 Cash $70At bond expiration, the creditor must make a journal entry for the last interest payment and the retirement of the bond through principal payment.
  • Then, it must record the bond principal being paid off.

• Characteristics of Bonds

  • A bond is a debt security under which the bond issuer owes the bond holder a debt including interest or coupon payments and or a future repayment of the principal on the maturity date.
  • Nominal, principal, par, or face amount—the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term.

• Debt-to-Equity Ratio

  • Debt is typically a long-term liability that represents a company's obligation to pay both principal and interest to purchasers of that debt.

• Components of a Note

  • Interest-notes generally specify an interest rate, which is used to determine how much interest the maker of the note must pay in addition to the principal.