What Is an Amortizable Bond Premium?

The amortizable bond premium is a tax term that refers to the excess price paid for a bond over and above its face value. Depending on the type of bond, the premium can be tax-deductible and ...

Bond Premium | Amortization Schedule | Example

Bond Premium Amortization Schedule. Under the effective interest method, bond premium amortization in each period is different. It is useful to create an amortization schedule in such a situation. An amortization schedule lists each interest payment and reconciles it with interest expense showing period-wise amortization of bond premium.

How to Amortize a Bond Premium (with Pictures) - wikiHow

How to Amortize a Bond Premium. Governments, corporations and other entities sometimes issue bonds to raise money for capital projects or public activities. It's a loan made by an investor to the issuer of the bond. The price paid (the...

Bond Premium Amortization (p32) -

If the bond yields tax-exempt interest, you must amortize the premium. This amortized amount is not deductible in determining taxable income. However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on your tax return) by the amortization for the year.

How to Calculate an Amortized Bond Premium | Bizfluent

If you prefer to make your own premium amortization table, keep in mind that you will need to make new calculations for each accrual period. Let's say you pay $10,500 for a bond with a maturity value of $10,000 that matures in five years, a 5% coupon rate and a yield to maturity of 3.5%, with interest payments every six months.

What is the amortization of premium on bonds payable ...

Since the premium of $60,000 is related to the interest rates when the bonds were issued, the amortization of the premium will involve the account Interest Expense or Bond Interest Expense. Since the bonds mature in 20 years, the $60,000 of premium on bonds payable will mean an annual amortization of $3,000 ($60,000/20 year).

Bond Premium with Straight-Line Amortization | AccountingCoach

Bond Premium with Straight-Line Amortization. When a corporation prepares to issue/sell a bond to investors, the corporation might anticipate that the appropriate interest rate will be 9%. If the investors are willing to accept the 9% interest rate, the bond will sell for its face value.

Amortization of Bond Premium | Step by Step Calculation ...

Advantages and Limitations. The primary advantage of premium bond amortization is that it is a tax deduction in the current tax year. If the interest paid on the bond is taxable, the premium paid on the bond can be amortized, or in other words, a part of the premium can be utilized towards reducing the amount of taxable income.

The amortization of premium on bonds payable — AccountingTools

Example of the Amortization of a Bond Premium. ABC International issues $10,000,000 of bonds at an interest rate of 8%, which is somewhat higher than the market rate at the time of issuance. Accordingly, investors are willing to pay more than the face value of the bonds, which drives down the effective interest rate that they receive.
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