Issuing Bonds with Issuance Costs and Accrued Interest:
Issuing bonds with issuance costs – If issuance costs are included when a bond is issued it will have an important effect on the net carrying value as well as the unamortized premium/discounts. The issuance costs will be subtracted from the net carrying value and added to the unamortized premiums/discounts.
Issuing bonds in between payment – If bonds are issued between payment dates, interest payments that have been accrued will need to be added to the bond issuance price. In other words, we are allocating the portion of the interest payment for the initial interest pay period, in which we did not own the bond, to accrued interest. Think of this as the prorated amount that is not paid.
Back To All Questions
You might also be interested in...
-
How can the audit team assess the operating effectiveness of controls?
The audit team must assess whether the controls that management has designed and implemented are actually effective. The auditor should also determine whether the person(s) implementing the internal controls are qualified to do the job. The visual below lists out the ways to assess the operating effectiveness of internal controls:
-
Amortization of Bond Premiums and Bond Discounts:
Understanding how bond premiums and discounts will be calculated and recognized on the financial statements will be critical to your understanding of this topic. Think of bonds as financial securities that are separate from its respective premium or discount amount. Premiums and discounts will be stated as separate line items on the company balance sheet...
-
Issuance of Bonds:
When a bond is issued to an investor, the price to compute the issuance for that bond will be the sum of the present value of the future principal payment plus the present value of the future periodic interest payments. The bonds stated interest rate is on the bond contract will often be seen as the coupon...
How can the audit team assess the operating effectiveness of controls?
The audit team must assess whether the controls that management has designed and implemented are actually effective. The auditor should also determine whether the person(s) implementing the internal controls are qualified to do the job. The visual below lists out the ways to assess the operating effectiveness of internal controls:
Amortization of Bond Premiums and Bond Discounts:
Understanding how bond premiums and discounts will be calculated and recognized on the financial statements will be critical to your understanding of this topic. Think of bonds as financial securities that are separate from its respective premium or discount amount. Premiums and discounts will be stated as separate line items on the company balance sheet...
Issuance of Bonds:
When a bond is issued to an investor, the price to compute the issuance for that bond will be the sum of the present value of the future principal payment plus the present value of the future periodic interest payments. The bonds stated interest rate is on the bond contract will often be seen as the coupon...
