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Unamortized Bond Premium

What is 'Unamortized Bond Premium'

The difference between the par-value or face-value of a bond and the price above this face value, at which the bond has been issued. Unamortized bond premiums do not include any interest that has been amortized or written off.


Also referred to as the amount between the face value and the amount the bond was sold at, minus the interest expense.

Explaining 'Unamortized Bond Premium'

Referred to as part of the bond premium that will be amortized (written off) in the future. A bond premium is a bond that is priced higher than its face value. The amortized amount of this bond is credited as an interest expense. The bondholder amortizes the bond to figure out the value of the interest rate, minus the coupon rate.

Unamortized Bond Premium FAQ

How do you calculate unamortized bond discount?

The unamortized bond discount is the difference between the par value of a bond—its maturity value—and the proceeds from the bond's sale by the issuing company, less the portion that has already been amortized (written off in gradual increments) on the profit and loss statement.

What type of account is unamortized bond discount?

A contra liability account that contains the amount of discount on bonds payable not yet amortized to interest expense.

Is bonds payable on the cash flow statement?

When a business pays interest to holders of a bond it issued to raise money, the payment is reported as a cash outflow in the operating activities section of the cash flow statement.

What is Unamortized discount on bonds payable?

An unamortized bond discount is the accounting applied to a bond sold below its face amount. When a bond's stated interest rate is lower than its market interest rate on its selling date, investors will only agree to purchase the bond at a discount from its face amount.

Where is discount on bonds payable on balance sheet?

Discount on bonds payable decreases the value of the bonds and is subtracted from the bonds payable in the long‐term liability section of the balance sheet.

How do I get unamortized premium?

To know how much you can amortize yearly, add the unamortized bond premium to the face value. Then multiply the result by the yield to maturity, and subtract it from the actual interest paid. If in the first year, the unamortized bond premium is $80, you would multiply $1,080 by 5% to get $54.

What does unamortized mean?

No portion of the loan principal is ever repaid. The full loan amount is paid back at the end of the loan with one balloon payment. Unamortized debt's interest rate can be fixed or adjustable.

Further Reading


Analysis on the Logic of Critical Data in the Application of Effective Interest Rate Method——A Subsequent Measurement to Bonds Payable for Example
en.cnki.com.cn [PDF]
… data in the application of effective interest rate method to calculate unamortized cost of … liabilities and the related periodical interest by using mathematical reasoning———bonds payable for … Anhui,China);Probe into the Practical Rate Amortization in Bond's Premium Price and …

Optimal bond trading with personal taxesOptimal bond trading with personal taxes
www.worldscientific.com [PDF]
… data in the application of effective interest rate method to calculate unamortized cost of … liabilities and the related periodical interest by using mathematical reasoning———bonds payable for … Anhui,China);Probe into the Practical Rate Amortization in Bond's Premium Price and …

Interest rate risk and capital adequacy for traditional banks and financial intermediariesInterest rate risk and capital adequacy for traditional banks and financial intermediaries
www.nber.org [PDF]
… data in the application of effective interest rate method to calculate unamortized cost of … liabilities and the related periodical interest by using mathematical reasoning———bonds payable for … Anhui,China);Probe into the Practical Rate Amortization in Bond's Premium Price and …

Liquidity, asset prices and financial policyLiquidity, asset prices and financial policy
www.tandfonline.com [PDF]
… data in the application of effective interest rate method to calculate unamortized cost of … liabilities and the related periodical interest by using mathematical reasoning———bonds payable for … Anhui,China);Probe into the Practical Rate Amortization in Bond's Premium Price and …

Premium Municipal Bonds and Issuer Fiscal DistressPremium Municipal Bonds and Issuer Fiscal Distress
papers.ssrn.com [PDF]
… data in the application of effective interest rate method to calculate unamortized cost of … liabilities and the related periodical interest by using mathematical reasoning———bonds payable for … Anhui,China);Probe into the Practical Rate Amortization in Bond's Premium Price and …

The consideration of coupon levels, taxes, reinvestment rates, and maturity in the investment management of financial institutionsThe consideration of coupon levels, taxes, reinvestment rates, and maturity in the investment management of financial institutions
www.cambridge.org [PDF]
… data in the application of effective interest rate method to calculate unamortized cost of … liabilities and the related periodical interest by using mathematical reasoning———bonds payable for … Anhui,China);Probe into the Practical Rate Amortization in Bond's Premium Price and …

Illiquidity and stock returns: cross-section and time-series effectsIlliquidity and stock returns: cross-section and time-series effects
www.sciencedirect.com [PDF]
… data in the application of effective interest rate method to calculate unamortized cost of … liabilities and the related periodical interest by using mathematical reasoning———bonds payable for … Anhui,China);Probe into the Practical Rate Amortization in Bond's Premium Price and …



FAQ


How do you calculate unamortized bond discount?

The unamortized bond discount is the difference between the par value of a bond—its maturity value—and the proceeds from the bond's sale by the issuing company, less the portion that has already been amortized (written off in gradual increments) on the profit and loss statement.

What type of account is unamortized bond discount?

A contra liability account that contains the amount of discount on bonds payable not yet amortized to interest expense.

Is bonds payable on the cash flow statement?

When a business pays interest to holders of a bond it issued to raise money, the payment is reported as a cash outflow in the operating activities section of the cash flow statement.

What is Unamortized discount on bonds payable?

An unamortized bond discount is the accounting applied to a bond sold below its face amount. When a bond's stated interest rate is lower than its market interest rate on its selling date, investors will only agree to purchase the bond at a discount from its face amount.

Where is discount on bonds payable on balance sheet?

Discount on bonds payable decreases the value of the bonds and is subtracted from the bonds payable in the long‐term liability section of the balance sheet.

How do I get unamortized premium?

To know how much you can amortize yearly, add the unamortized bond premium to the face value. Then multiply the result by the yield to maturity, and subtract it from the actual interest paid. If in the first year, the unamortized bond premium is $80, you would multiply $1,080 by 5% to get $54.

What does unamortized mean?

No portion of the loan principal is ever repaid. The full loan amount is paid back at the end of the loan with one balloon payment. Unamortized debt's interest rate can be fixed or adjustable.

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