How is the premium or discount on bonds purchased as debt investment at amortized cost generally reported in financial statements?

What is debt investment at amortized cost?

Under the amortized cost method, the debt investment is initially recorded as an asset at its cost; any excess of the purchase price over par value is recorded as bond premium and any excess of par value over bond price is recorded as a bond discount.

How do you account for bonds purchased at a premium?

The journal entry to record this transaction is to debit cash for $103,465. You have two accounts to credit: bonds payable for the face amount of $100,000 and premium on bonds payable for $3,465, which is the difference between face and cash received at issuance.

Are bonds measured at amortized cost?

Balance Sheet Amount

Bonds, except for mandatory convertible bonds: For reporting entities that maintain an asset valuation reserve (AVR), the bonds shall be reported at amortized cost, except for those with an NAIC designation of 6, which shall be reported at the lower of amortized cost or fair value.

Will the amortization of discount on bonds payable increase or decrease bond interest expense?

Amortization is recorded either at the end of the fiscal year or each time interest is paid. The credit to Discount on Bonds Payable reduces that account and increases the carrying value of the bonds. The debit to Interest Expense increases interest expense.

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Where does debt investment go on the balance sheet?

A company lists its long-term debt on its balance sheet under liabilities, usually under a subheading for long-term liabilities.

How do you account for bonds bought at a discount?

As this entry illustrates, Cash is debited for the actual proceeds received, and Bonds Payable is credited for the face value of the bonds. The difference of $7,024 is debited to an account called Discount on Bonds Payable.

How do you record a bond purchased at a discount?

The account Discount on Bonds Payable (or Bond Discount or Unamortized Bond Discount) is a contra liability account since it will have a debit balance. Discount on Bonds Payable will always appear on the balance sheet with the account Bonds Payable.

How do you record a bond issued at a discount?

Accounting for Bond Amortization

If there was a discount on bonds payable, then the periodic entry is a debit to interest expense and a credit to discount on bonds payable; this has the effect of increasing the overall interest expense recorded by the issuer.