Bond Complications Flashcards
What is a Zero Coupon Bond?
These bonds pay zero interest, but the accounting procedure remains the same except that no cash interest is paid during the term. Entire amount of interest is included in the face value. SL method not applicable since it is a “deep discount” bond
How many months of interest are collected at issuance when bonds are issued between interest dates?
Number of months between the most recent interest payment date and the date of issuance.
Define “bond proceeds.”
The sum of the bond price and any accrued interest
Define “stated rate.”
Rate listed on the bond and used to calculate accrued interest.
How are bond issue costs accounted for?
Treated as a direct reduction from the debt carrying value and amortized to interest expense over the term of the bonds.
Define “bond issue costs”
The costs of printing, registering, and marketing the bonds.
What is the length of a bond term when bonds are issued between interest dates?
Period of time from issuance date to maturity date
