What is an unamortized debt discount?

An unamortized bond discount represents a difference between the face value of a bond and the amount actually paid for it by investors—the proceeds reaped by the bond’s issuer. The bond issuer amortizes—that is, writes off gradually—a bond discount over the remaining term of the associated bond as an interest expense.

Where should the unamortized premium on a bond payable be reported on the balance sheet?

Where the Premium or Discount on Bonds Payable is Presented. The premium or the discount on bonds payable that has not yet been amortized to interest expense will be reported immediately after the par value of the bonds in the liabilities section of the balance sheet.

How should discount on bonds payable be reported?

Discount (premium) on bonds payable should be reported in the balance sheet as a direct deduction from (addition to) the face amount of the bond. Both are liability valuation accounts.

What does unamortized mean?

: not amortized unamortized costs/fees.

How is unamortized Debt Discount reported on the balance sheet?

Before cumulative effect of accounting changes and before discontinued operation s of a segment of a business 2. Unamortized debt discount should be reported on the balance sheet of the issuer as a. A direct deduction from the face amount of the debt b. A direct deduction from the present value of the debt c. A deferred charge d.

How is the unamortized bond discount written off?

The bond issuer writes off the full amount of the bond discount over the remaining term of the bond with which it is associated. The amount written off is charged to interest expense. The amount of the bond discount that has not yet been written off is called the unamortized bond discount.

When does unamortized discount to par turn into a recognized capital loss?

A bond’s unamortized discount to par will: (1) turn into a recognized capital loss if the bond is sold before its stated maturity; or, (2) shrink as the bond’s market price rises with the passage of time as the bond nears its maturity date, which the bond will then be priced at its par value.

What does it mean when a bond has a discount?

The discount refers to the difference in the cost to purchase a bond (it’s market price) and its par, or face value. The issuing company can choose to expense the entire amount of the discount or can handle the discount as an asset to be amortized. Any amount that has yet to be expensed is referred to as the unamortized bond discount.