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When bonds are issued at a premium what happens to the carrying value and interest expense over the life of the bonds?
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Is the straight-line amortization or effective interest rate method better?
This method is preferred over the straight-line method of amortizing bond discount or bond premium. Amortization of a bond discount or premium is the difference between the interest expense and the nominal interest payment. The amortization entry is: Interest Expense (effective interest rate x carrying value) Cash (nominal interest rate x face value) Bond Discount (for the difference)
What is the journal entry to record interest expense and bond premium?
debit interest expensedebit bond premiumcredit cash
XYZ Corp sells its bonds at a premium and applies the effective interest method in amortizing the premium.Do you think the annual interest expense will increase or decrease over the life of the bonds?
It really depends on how much is the premium paid. Effectively if the premium paid is higher than the par value of the bonds issued, the annual interest expense would be relatively lower. Another perspective is that since that both the bonds and its premium uses effective interest method, considering all factors remain the same, the annual interest expense will remain unchanged. Premium of the bond should be captialized within the holders of the bonds and amortized over the years in which the manner best represents. Issuer of the bonds generally do not captialize the premium of the bond separately. You should also note that the bonds issued are not compound financial instruments or contain any embedded derivates.
What is premium expense charges?
exspense charges that are premium.
What happens when issuing bonds payable when the market interest rate is less than the stated interest rate?
premium
What is a premium expense charge?
A premium expense charge imposed by an insurer is typically found on universal life insurance policies and is designed to enable the insurer to recover its business acquisition costs and premium taxes.
What is premium loading in insurance?
Premium loading is an amount an insurance company adds to the basic premium to cover the expense of securing and maintaining the business.
What best describes gross annual premium?
In fact, gross annual premium includes tax element including service tax charged on premium amount.
What is loading in insurance?
Premium loading is an amount an insurance company adds to the basic premium to cover the expense of securing and maintaining the business.
When bonds are issued at a premium what is the affect on interest?
Bonds issued at a premium offer an interest rate that is above the market interest rate. Typically, a bond issuer offers a premium interest rate to offset higher risk associated with a bond offering that has a low credit rating. A purchaser of a bond offered at a premium will receive a higher interest rate but will incur a higher degree of credit risk.
When a bond is bought at a premium do you recognize income or expense?
You have a high probability of creating a principle loss.
What happens if you put in premium gas in a dodge stratus 03?
Premium is ok
