Bond amortization needs to be posted in the General Journal and then the cost basis is adjusted manually in the Asset & Liability screen:- Go to General Journal transaction entry in the appropriate month.
- Use a payee that is descriptive, like "Bond Amoritization".
- Select Multiple Distribution.
- First entry of the multiple distribution screen should be a descriptive memo so that both accounts will have that memo for the transaction. (e.g., bond amortization for Cal Trans 5% 9/1/02)
- Second entry is the actual bond issue account. Credit the amortization amount.
- Third entry should be the offsetting bond interest account. Debit the same amount as the amortization.
- Select OK to complete transaction entry.
- Access the bond's Asset & Liability Info screen.
- Adjust cost basis by amortized amount.
By adjusting the cost basis by the amortized amount, by the time the bond reaches maturity or call date, it will be at the price/value of the maturity or call. This prevents an inaccurate gain/loss calculation at maturity/call.Setting up a worksheet for amortization can be helpful in keeping track of the amortization schedule which is usually done every six months until the bond reaches par or call value.
The same is done in reverse (i.e., debit bond issue, credit interest account) for an OID bond.
[This message has been edited by David (edited 09-11-2007).]
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posted 11-21-2002 11:31 AM
