GASB 65 eliminates amortization of all issuance costs (other than prepaid insurance) and establishes deferred inflows of resources and deferred outflows of resources from refunding for unamortized gains or losses on refunding. This eliminates the application of this unamortized balance against bonds payable.
Full Answer
What is the unamortized bond premium after a year?
The unamortized premium after a year is $90 bond premium – $6.40 amortized amount = $83.60. For the second tax year, $6.40 of the bond premium has already been amortized, so the bond's cost basis is $1,090 - $6.40 = $1,083.60.
Should I recognize a bond premium amortization on tax exempt interest bonds?
May 31, 2019 4:53 PM Should i recognize a bond premium amortization on tax exempt interest bonds? and if so where? If the bond yields tax-exempt interest, you must amortize the premium. This amortized amount is not deductible in determining taxable income.
Is the loss of premium on a tax-free municipal bond tax deductible?
Since the bond is a tax-free municipal, you don’t get to deduct the $19 loss of premium. To figure the annual amortization amount on a tax-free municipal bond, perform the following steps: Find the yield-to-maturity on the bond.
Can I issue tax-exempt advance Refunding bonds?
Taxable advance refundings of tax-exempt or taxable bonds are still permitted. Issuers of taxable or tax credit bonds (including Build America Bonds or “BABs”) will, in most cases, be able to issue tax-exempt advance refunding bonds to refinance those obligations.
How do you treat bond premium on tax-exempt bonds?
If the bond is a tax-exempt municipal, you report the loss of premium value and subtract the loss from the cost basis of the bond, but you don't subtract it from your taxable income. Tax-exempt bonds purchased for a price above par must be amortized.
Is tax-exempt bond premium taxable?
If the bond yields tax-exempt interest, you must amortize the premium. This amortized amount is not deductible in determining taxable income.
Where should the unamortized premium on a bond payable be reported on the balance sheet?
liabilities sectionThe 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.
What is unamortized bond premium?
Unamortized bond premium refers to the amount between the face value and the higher amount the bond was sold at, minus the interest. The unamortized bond premium is the part of the overall bond premium that the issuer will amortize—that is, write off incrementally against expenses in the future.
How do you treat acquisition premium on tax return?
For a taxable covered security acquired with acquisition premium, your payer generally must report either (1) a net amount of OID that reflects the offset of OID by the amount of acquisition premium amortization for the year or (2) a gross amount for both the OID and the acquisition premium amortization for the year.
Can I deduct bond premium?
The amortizable bond premium is a tax term that refers to the excess price paid for a bond over and above its face value. Depending on the type of bond, the premium can be tax-deductible and amortized over the life of the bond on a pro-rata basis.
How do I fix unamortized premium?
Example: Unamortized Bond Premium CalculationMultiplying the selling price of the bond by the YTM yields $1,090 x 4% = $43.60.This value when subtracted from the coupon amount (5% coupon rate x $1,000 par value = $50) results in $50 - $43.60 = $6.40, which is the amortizable amount.More items...
Is an unamortized bond premium a contra liability account?
The account Discount on Bonds Payable (or Bond Discount or Unamortized Bond Discount) is a contra liability account since it will have a debit balance. Discount on Bonds Payable will always appear on the balance sheet with the account Bonds Payable.
What is the difference between amortized and unamortized?
The primary difference between amortized and unamortized debt is the mix of principal and interest that the borrower is required to pay back monthly. While borrowers pay back principal and interest on amortized debt in their monthly payment schedule, unamortized debt only requires them to pay on their interest.
How do you account for bond premium?
The account Premium on Bonds Payable is a liability account that will always appear on the balance sheet with the account Bonds Payable. In other words, if the bonds are a long-term liability, both Bonds Payable and Premium on Bonds Payable will be reported on the balance sheet as long-term liabilities.
What does unamortized mean?
or unamortised (ˌʌnəˈmɔːtaɪzd ) adjective. finance. relating to a bond premium or bond discount that has not been amortized yet.
Is the face value of the bonds less unamortized bond discount or plus unamortized bond premium at the redemption date?
The carrying value§ The carrying value is the face value of the bonds less unamortized bond discount or plus unamortized bond premium at the redemption date.