Bond Complications

Question 1

When you issue a bond that is in-between interest dates, how do you account for that period?

Answer 1

Pay the bond holder the full amount of interest for that period, and the holder will repay you the amount of interest that they didn’t hold the bond.

Question 2

What are bond issue costs

Answer 2

Costs that are paid to a third party that include (legal fees, printing fees, underwriting fees, registration fees).

Question 3

How do bond issue costs impact the accounting for bonds?

Answer 3

Reduces the face amount of the note and amortize as expense over the bond term.

It doesn’t impact the bond price, premium or discount are unaffected.

The cost is simply amortized over the life of the bond.