What does it mean when a bond sells at a premium?
A premium bond is a bond trading above its face value or costs more than the face amount on the bond. A bond might trade at a premium because its interest rate is higher than the current market interest rates. The company's credit rating and the bond's credit rating can also push the bond's price higher.
When the contract rate is less than the market rate a bond sells at a premium?
If the contract rate is less than the market rate, the bond will sell at an amount less than face (this is known as a discount). If the contract rate is greater than the market rate, the bond will sell at an amount greater than face (this is known as a premium).
When a bond is sold at a premium at what value is it reported on the balance sheet?
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.
When a bond is sold at a premium the quizlet?
When a company issues a bond at a discount: the company's interest expense will be more than the interest paid each year. When bonds are issued at a premium: interest expense on the bonds will be less than the interest paid.