How would the accounting entries look for a bond issued at par but redeemed above par? I came up with the below entries at issuance: Dr Bonds Receivable 110 Cr Premium on Redemption 10 (contra asset) Cr Cash 100 (par value) Should Bonds Receivable be recorded at par and the accrued interest debited to another account?
If a company was the issuer and had to pay a premium: dr bonds payable 100 (reducing the liability) dr bond retirement premium (expense) cr cash 110 (reducing assets) If a company or somone held bonds that were redeemed above par: Dr Cash 110 Cr Capital gain 10 Cr Bond Principal owed 100 edit: the capital gain would be investment income if it was ST
thanks psn0706, i think your entries are at redemption time. i’d like to know the accounting treatment at issuance For the bondholder, at issuance, would the amount (redemption - par) be recorded on the balance sheet or income statement ? or perhaps just a disclosure on the footnotes ?
well the original question seems like it was for a callable bond (redeemable above par). You can’t accrue for, or expense, the difference between par and the call price at the time of issuance. you can only expense the difference between par and call price in the period the bonds are redeemed. however, your second post’s question seems like you are just talking about a basic discount bond where the bond’s issue PRICE is below par value at the time of issuance. here you can accrue the difference between issue price and par in every payment period. In this case, the JEs in the issuer’s books for a discount bond at issuance are: Dr Cash 100 (the bond price) Dr Bond Discount 10 Cr Bond Liability 110 (par)