How Do You Record An Accrued Bond Interest Expense On A Balance Sheet?
A company records accrued bond interest expense on its balance sheet when it issues bonds to raise funds. The bonds may be issued at face value (the actual price of the bonds), at a discount (less than the face value) or at a premium (more than the face value). Recording the bond liability and the total associated accrued interest is handled differently in each of these situations. Assume that company A sells 5-year bonds to an investor in the the amount of $100,000 at 10 percent interest. At the end of each year over the 5-year life of the bonds, company A will pay $10,000 (10 percent) to the investor. Record the bond in the Long Term Liability section of the balance sheet, because its maturity date is longer than one year. Debit Cash ($100,000) when the investor buys the bonds and credit Bonds Payable ($100,000). To record the accrued interest (a current liability because it is due within 1 year), debit Interest Expense ($10,000) and credit Accrued Interest Payable $10,000) in the Cu
