Question
In: Accounting
When does a premium on bonds payable occur?
When does a premium on bonds payable occur?
Solutions
Expert Solution
Step 1: Definition of bond
Bonds are long-term debt where a company raises money from investors.
Step 2: Occurrence of compensation on bonds.
Premium bonds' premium occurs when the stated interest rate is more than the market interest rate. If the market rate is less than the effective interest, the investor pays extra to reduce this gap
The stated interest rate is an interest that the issuer of the bonds provides.
Sahil Dangi answered 2 years agoRelated Solutions
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