what are the accounting entries to record a bond purchase? Is the bond recorded at face value or at cost?
what are the accounting entries to record a bond purchase? Is the bond recorded at face value or at cost?
Purchasing a bond isn't an adjusting entry. So I don't know what you're referring to.
However, I can tell you that the Bond Payable account is always at face value. But that isn't an adjusting entry.
thanks for your reply but... whether it's an adjusting entry or not is not what am asking. Question is: do you record the bond purchase (asset not liability) at cost or at face value. Because previously when I was in college, we're taught that there are two ways to record a bond purchase: 1) at face value then you record the unamortized portion of the discount/premium; and 2) at cost but recognize only the amortized portion on balance sheet. Eitherway, it will give you the correct value of the at any point in time. So the question really is what is the current practice from your end/experience? Thanks again. Have a nice day.
Did you edit that? I seem to distinctly remember it asking about the adjusting entry.Quote:
thanks for your reply but... whether it's an adjusting entry or not is not what am asking.
Purchase... sorry. We get a tonage of questions about bond issuances - that's just habit.Quote:
question is: do you record the bond purchase (asset not liability) at cost or at face value.
Either way, it's going to end up at cost because the face value will be increased/decreased with the premium or discount. So you're meaning whether to show the separation, or whether you just show it as one account at cost. I've only seen it by the second method, but I don't think that carries a lot of weight. I'm not aware of any accounting rule that says there's a preference of one over the other, though any textbook I've seen does it at cost. (You've obviously seen one that does otherwise.)Quote:
because previously when i was in college, we're taught that there are two ways to record a bond purchase: 1) at face value then you record the unamortized portion of the discount/premium; and 2) at cost but recognize only the amortized portion on balance sheet. Eitherway, it will give you the correct value of the at any point in time. So the question really is what is the current practice from your end/experience? Thanks again. Have a nice day.
I can see logic behind both ways. I don't think it's all that terribly important. Also keep in mind that using a separate account for the premium/discount is only something you do internally. On the balance sheet I would list it at the carrying value. For real corporate statements, generally everything is listed on statements at the net or carrying value, with any details needing disclosed in the notes.
You've learned two ways. I think you ought to just go with whatever's comfortable to you. But that's just my opinion.
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