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ACC 306 Week 1 Discussion 1 Operating Liabilities and Contingencies NEW
Read Chapters 13 and 14 in the textbook.
Write: When bonds are issued at other than par value, a discount or premium is recorded. This discount or premium is amortized over the life of the bond. However, callable bond may be retired before the maturity date, which leaves a loss or gain to be recognized. Read the Income Recognition Rules Related to Callable Bonds: Changes Coming (Links to an external site.)Links to an external site. article.
The third paragraph of this article discusses that all premiums on callable debt securities should be amortized to the earliest call date and all discounts on callable debt securities should amortize to the maturity date.
What effect will this have on interest expense if the bonds are issued at a premium and a discount?
If you issue $10,000,000, 30 year callable bonds at a 5% premium, with a call feature at 10 years, what effect will this have on interest expense the first ten years? Provide journal entries and a comparative table to explain the differences.
If you issue $10,000,000, 30 year callable bonds at a 5% discount, with a call feature at 10 years, what effect will this have on interest expense the first ten years? Provide journal entries and a comparative table to explain the differences.
Guided Response: Respond to at least two other postings. Each response should be a minimum of 100 words and include an in-text citation, a quote from the pronouncement.
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