What Is the Difference in Recording Interest Expenses for Bonds Issued at a Discount & at a Premium?

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Recording interest expenses for bonds issued at a discount and recording those same expenses for bonds issued at a premium are two entirely different concepts. Find out the difference between recording interest expenses for bonds issued at a discount and at a premium with help from a longtime and experienced accountant in this free video clip.

Part of the Video Series: Understanding Finance & Accounting
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Video Transcript

Hi, I'm Lori Greer from Atlanta, Georgia and I'm here to answer the question, what is the difference between recording the interest of bonds issued at a discount or bonds issued at a premium? A bond is issued at a premium when issued at a price above it's maturity value, a bond is issued at a discount when it's issued a price below it's maturity value. Although discount on bonds payable has a debit balance it's not an asset, it's a contour account which is deducted from bonds payable on the balance sheet. The premium bonds payable is added to bonds payable on the balance sheet. To record a crude bond interest, an amortization of bond discount, you'll want to debit bond the interest expense, credit discount on bonds payable and credit bond interest payable.To record a crude bond interest in an amortization of your bond premium you'll want to debit bond interest expense, debit your premium on bonds payable and credit bond interest payable. I'm Lori Greer form Atlanta, Georgia and we just answered the question, what is the difference between recording the interests of bonds issued at a discount or bonds issued at a premium.

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