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.
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