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Amortization of Bond Premium
Reducing the Bond Premium liability over time to decrease the effective interest expense.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Interest Expense | Expense (+) | 4,500.00 | - |
| Premium on Bonds Payable | Liability (-) | 500.00 | - |
| Cash (Coupon Payment) | Asset (-) | - | 5,000.00 |
💡 Accountant's Note
Because the bond was sold at a premium (above face value), the 'real' interest expense is lower than the actual cash paid to bondholders. The premium is 'bled' out over the bond's life.
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