Discount or premium is amortized over the life of the bond

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Reference no: EM131221057

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, a callable bond may be retired before the maturity date, which leaves a loss or gain to be recognized. Read the FASB Looks to Amend Income Recognition Rules Related to Callable Bonds 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 be amortized 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.

Reference no: EM131221057

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