Bonds Flashcards
1
Q
Bond Premium Amortization
A
Annual interest cash payment: calculated using the stated interest rate
Interest expense = cash payment - premium amortization
Premiums reduce the interest expense AND need to be subtracted from net cash flows from operating activities
2
Q
Note interest bearing notes less than 1 year are normally reported at what value?
A
Face value and not discounted to the present value with the factor
3
Q
Bond Discount Amortization
A
Bond Discount increases the carrying value of the bond
Interest Expense - Cash payment = Discount
Add back to net income for cash flows from operating activity because it was additional expense taken that is non cash and DECREASED net income
