when you have a 1000 par bond issued at a discount, the cff increrases by say 925 and the liability of 925 goes to the b/s. my question is ,does the 75 (amount to be amortized) also go into the b/s?. i guess it should…pls confirm. if no,please explain. thanks
Discount Bond on Issuance Cash DR 925 Bond Discount DR 75 *******Bond Payable CR 1000 Premium Bond on Issuance Cash DR 1100 *******Bond Payable CR 1000 *******Bond Premium CR 100
It is added to the balance sheet over time as the bond approaches maturity.
A discount bond is like not paying off all the interest on your credit card. The amount owed increases every period, as does the interest charge.
Good expression chrismaths. Makes better sense now.