4 thoughts on “How Are Bond Payable Accounted?”

  1. I think the mistake exists. The cash should be debited for 110,000, and 1,250 of interest expense should be credited to Bonds payable. Correct?

  2. Audrey, when you sell a bond at 110, the parties do directly adjust the proceeds for the upcoming coupon. (This is as opposed to stocks, where the market selling price absorbs the effect of the upcoming payment, thus dipping immediately at post-dividend date.) So the bond proceeds in fact are $111,250 even though the market quote says 110.

    He is correct to credit bond interest expense $1,250, because it will be debited for a full semi annual period on 7/1 ($2,500) even though only 3 months interest (half a semi-) will accrue. The net debit entries through 7/1 will be $2,500-$1,250=$1,250 which is indeed the net cash payout for the 3 months.

  3. In bonds issued between interest dates ,what would be the amortisation of premium on 7/1/20X8 using effective interest method

  4. I am lost with regards to the journal entries for the three months ($1,250). I would debit interest payable credit cash. Please explain why not?

Leave a Reply

Your email address will not be published. Required fields are marked *