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The Last Bank lends money to a customer on a six month note. The bank accrues interest on the note at the end of the year. The journal entry would include:
Effective Interest Method
A method of amortizing the discount or premium on bonds payable that results in a constant rate of interest over the life of the bond.
Semiannual
Occurring twice a year; a term often used in the context of payments, reporting periods, or interest calculations.
Par Value
A nominal value assigned to a share of stock in the charter of a corporation, unrelated to market value.
Effective Interest Amortization
A method of allocating loan interest payments over the life of the loan, taking into account the varying principal amounts.
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