Asked by Meghan Suchy on Jun 14, 2024
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If bonds sell at a premium the interest expense recognized each year will be greater than the contractual interest rate.
Premium
An amount paid in addition to a standard price or rate, often for insurance or an enhanced level of service or coverage.
Interest Expense
The cost incurred by an entity for borrowed funds, recognized as a non-operating expense on the income statement.
Contractual Interest Rate
The agreed-upon rate of interest that is to be applied on the principal amount of loans, bonds, or other forms of debt as specified within a contract.
- Recognize the accounting treatments for bonds issued at a premium, discount, face value, and their subsequent interest expense recognition.
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Learning Objectives
- Recognize the accounting treatments for bonds issued at a premium, discount, face value, and their subsequent interest expense recognition.
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