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Author
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Topic: Investments purchased at a discount
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FNuser117
Member
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posted 02-23-2005 08:57 AM
 
Is there a way to enter securities that are purchased at a discount? If I go into A/L Info and enter the cost basis and number of shares, the calculation is off because of the discount.
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John
Administrator
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posted 02-25-2005 07:34 AM
Sure.
Enter the purchase transactions just like normal. Enter the amount of cash paid for the transaction. Now on the Multiple Distribution screen, the same amount will appear on the 1st distribution for the investment account as normal. Change this amount on the 1st distribution line to be the cost basis for the investment. This amount will appear as the cost basis on the A/L info screen.On a 2nd distribution line, enter the account and net amount to balance the transaction. The account could be the investment account again, some accrued interest income account or some other account.
Let me know if this answers your question.
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FNuser117
Member
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posted 03-07-2005 02:51 PM
I think I was not clear enough. We have an account that holds several bonds. The bonds were all purchased at a discount, so when I enter the information in the A/L screen, I put the current price, date, purchase date, cost basis, and number of shares. The problem is, when the cost basis and number of shares are entered, FN automatically calculates the price per share based on this. However, since the bonds were purchased at a discount, the price per share is incorrect (it should be cost basis / number of shares * discount rate). Also, the current value is calculated the same way, so the market value on the books is overstated. Is there a way to enter this in FN, or do I need to manually adjust my balances every month?Thank you
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David
Administrator
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posted 03-14-2005 02:11 PM
Normally you enter purchase date, purchase price, and number of shares in the multiple distribution screen as you enter an investment transaction. The purchase price is the cash price; what you actually paid after discount. The purchase price is also the cost basis. If you are adding to a particular account by buying more bonds, you still do that as an investment transaction. Since the cost basis is the discounted price, cost basis / number of shares = correct (cost) price per share. If you update prices using Enter Prices to Update Securities, you enter the current price. The current price is the market price and reflects any discount. If you amortize the discount, see the Forum post Post Bond Amortization. Another post of interest is accrued interest on bonds Hope this is helpful. [This message has been edited by David (edited 03-14-2005).]
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