Bond Interest Expense
What is Bond Interest Expense?
Bond interest expense is the interest a corporation pays to holders of its bonds.
![bie 1](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-1-1.jpg)
How it Works
One way for a corporation to raise money is by selling bonds.
![bie 2](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-2.jpg)
Each bond will have a face value.
![bie 3](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-3.jpg)
This is how much investors will pay for the bond.
![bie 4](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-4.jpg)
The bond will have a coupon or stated rate.
![bie 5](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-5.jpg)
This is the interest rate the corporation will pay to investors over the bond term.
![bie 6](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-6.jpg)
The issuer will pay this interest semi-annually.
![bie 7](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-7.jpg)
To record each interest payment, you credit the cash account.
![bie 8](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-8.jpg)
This shows that money came from the bank.
![bie 9](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-9.jpg)
After this, you debit the interest expense account.
![bie 10](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-10.jpg)
This shows the money was used for interest expense.
![bie 11](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-11.jpg)
When complete, the transaction will show that money was taken from the bank and used for interest expense.
![bie 12](https://seeaccountingnow.online/wp-content/uploads/2021/08/bie-12.jpg)
© R.J. Hickman 2020