During the first year bonds are sold in the amounts and under the conditions which follow:
First. On the date of issue $10,000.00 of these bonds are sold at par.
Second. At the end of three months $10,000.00 of the bonds are sold at 101 and accrued interest, yielding $10,225.00 of which $10,000.00 is principal, $100.00 premium, and $125.00 interest.
Third. The next sale is $10,000.00 of the bonds at 98, interest accrued $250.00, yielding $10,050.00 made up of principal $10,000.00, less discount $200.00, and interest $250.00.
Ledger Accounts of a Bond Issue
51. Premium on Bonds. When bonds are sold at a price above par, the premium should be credited to a premium on bonds account. When sold below par, the discount may be charged to the same account.
52. Interest on Bonds. The interest paid on bonds may be charged to an interest on bonds account, which keeps it separate from the regular interest account. When bonds are sold with accrued interest, which is paid by the purchaser, the accrued interest is credited to interest on bonds.
53. Expense of Bond Issue. All expenses incurred in the issue and sale of bonds should be charged to expense of bond issue account. The account can be closed into profit and loss immediately, or it is proper to spread it over the life of the bonds, charging off the proper amount each year. It is also considered proper to charge discount on bonds to this account.