7252569-MIdterm-1 (dragged) 21

12 when bonds are issued between interest dates the

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Unformatted text preview: hen bonds are issued between interest dates, the issuer must receive the purchase price plus an amount equal to the interest earned on the bonds since the last interest payment date. On the next interest payment date, the bondholder receives the entire semi-annual (if payable semi-annually) interest payment. However, the amount of interest expense to the issuing corporation is the difference between the semi-annual interest payment and the amount of the interest prepaid by the purchaser. For example, assume a 10-year bond issue in the amount of $300,000 bearing 9% interest payable semi-annually is dated January 1, 2004. If the...
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This note was uploaded on 03/28/2012 for the course ACCTG ACC423 taught by Professor Smith during the Spring '10 term at University of Phoenix.

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