Rite Aid Corporation’s debt also includes 9.375% senior notes. The face value of these notes is $410,000. The current carrying value is $405,951. Carrying value or book value is the face value plus any premiums or minus any discounts. Thus, the difference between the face value and carrying value for these notes is due to an unamortized discount of $4,049. The cash interest payment on these notes during fiscal 2009 equals $38,438, and this number can be calculated by taking the face value of $410,000 and multiplying it by the coupon or face interest rate of 9.375%. This amount would also be credited to cash when journalizing the entry.
Although the cash payment is $38,438, this does not mean that the interest expense will be this same amount.
Although the cash payment is $38,438, this does not mean that the interest expense will be this same amount.