2024 CPA FAR Exam-Bond Issuance Costs

Issuing Bonds requires expertise in legal and registration issues and the accounting involves journal entries that make it appear that there are two market rates of interest, one for the present value calculation, and a higher rate for the effective interest expense calculation.
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[@flyerthanapigeon]

C. Thank you for the helpful video. Retaking FAR in the next few weeks so hoping (and preparing) for the best.

[@Ehrldaddy]

Bonds are a tough topic. lots of rules to remember. I decided to skip the FAR stuff and just emailed my college professor for his old slides that he taught us. was much more familiar and better way for me to relearn the topic.

[@victorko5671]

The correct answer is C): an addition to the bond discount or subtraction of a bond premium. Here’s a bit more detail: Bond issuance costs are initially capitalized and then amortized over the life of the bond. These costs are recorded as a contra liability on the balance sheet, which means they reduce the carrying amount of the bond liability. So, rather than being a separate asset or liability, bond issuance costs are treated as a reduction of the bond’s carrying amount, similar to how bond discounts are handled.