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Subject Topic: bonds-dates (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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Aries1
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Posted: 24 Jun 2009 at 15:22 | IP Logged  

For bonds

if the issue date is aug 31

and bonds are dated april 1,then do we calculate interest from april 1 or aug 31?

I know that bond issue costs are amortized from april 1 date.

thanks

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FAR 07/6/09

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Michelle94
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Posted: 24 Jun 2009 at 23:19 | IP Logged  

Not sure if you have your terms correct, or if I'm misunderstanding, but this is the way I understand it. Bonds are "issued" first and "sold" at anytime after being issued.

If the bonds are sold (Aug 31) after they are issued (Apr 1), interest for the period from April 1 to Aug 31 must be calculated. In essence, the person buying the bonds will pay the interest up front that had accrued from the date of issuance. Then when the actual interest payment happens for all bond holders (usually every 6 months or a year on a designated date), the purchaser will get the entire interest payment (from April 1).

Hope my explanation isn't too confusing. If it is, let me know and I'll try a different approach.  : )



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Aries1
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Posted: 25 Jun 2009 at 00:39 | IP Logged  

hmmm...

i get your answer.thanks.

there is a difference of terms though.I understand 2 terms .it says bond is dated jan 1,.and then they can say that these bonds were issued april 1.

so although the bonds were dated jan 1 and were ready to be sold but for whatever reason they were not issued till april.

as per your explanation on april we should accrue for jan to march interest and pay total 6 months in june.

makes sense:)

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FAR 07/06/09

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kj_nyc
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Posted: 25 Jun 2009 at 08:51 | IP Logged  

Bonds can be sold before being issued.   Interest expense is from the date the bonds were sold, not issued, so yes, interest expense is from Jan 1 even if they were not issued until April.
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