Purchase Solution

Bond Discounts and Bond Premiums

Not what you're looking for?

Ask Custom Question

Explain how bond discounts and premiums usually arise. Describe how they are accounted for in the balance sheet and income statement.

Purchase this Solution
Solution Summary

This solution discusses the difference between a bond discount and a bond premium. The proper reporting method for the balance sheet and the income statement in relation to a bond discount and a bond premium is also discussed.

Solution Preview

A bond discount or a bond premium results from a variance in the effective interest rate and the coupon rate of the bond. A premium happens when the effective interest rate is lower than the coupon rate and a discount takes place when the effective interest rate is higher than the coupon rate of the bond. Essentially, showing a bond discount means that the bond was sold for less than its face ...

Purchase this Solution
Free BrainMass Quizzes
Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

View More Free Quizzes
Related BrainMass Solutions

  • Financial Accounting :MCQ

    When a company issues bonds, how are unamortized bond discounts and premiums classified on the balance sheet? a) Bond discounts are classified as expenses, and bond premiums are classified as revenue.

  • Which of the following is true regarding bond discounts and/or premiums?

    96973 True Statement Regarding Bond Discount or Premium Which of the following is true regarding bond discounts and/or premiums? Bond discount is amortized but bond premium is not.

  • Relationships between interest rates and bond prices

    For high-yield bonds having very strict covenants which restrict the issuer in its operations, premiums are paid. On the contrary, low-yield bonds sell at discounts.

  • Finance - bonds

    This provides examples of working with bonds, including discounts and premiums.

  • Initial Value and Change in Value of Bonds

    and how to prepare amortization schedules for bonds selling at discounts and premiums.

  • Computing and Journalizing Bond Premiums and Discounts

    250920 Computing and Journalizing Bond Premiums and Discounts The team and I already have the answers for both of these problems in question. We have agreed to the answers and are happy with them.

  • Investment Portfolios Effects on Income Statements

    The bond will be reported at its face value - $20,000 - since it was purchased at this amount and there were no amortizations of discounts or premiums What adjustment would Archibald make on the books at the end of the year; Archibald doesn't use an

  • Practice questions about liabilities

    Which of the following is true regarding bond discounts and/or premiums? a. Bond discount is amortized but bond premium is not. b. Bond premium is amortized but bond discount is not. c. Neither bond discount nor premium is amortized. d.

  • Bond Features

    Some bonds are sold for more or less than their face values: these bonds are sold at premiums or discounts. The discount and premium will reflect the market rate when the bonds are issued or when bonds are sold in the secondary market.

View More Related Solutions