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how are bonds bought at a premium recorded?

how are bonds bought at a premium recorded?

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Answer #1

For premium bonds, inverters pay more amount than the face value of the bond.

When stated interest rate of the bond is higher than privilege interest rate, investor agrees to accept lower return than the investment.

The difference between face value and price of bond is recorded in a premium on bonds payable account. If bond is purchased for $ 1,050 with a face value of $ 1,000, the entry is:

Debit

Credit

Cash

$1,050

     Premium on bonds payable

$50

     Bonds payable

$1,000
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