GnuCash: how to enter the purchase of a corporate bond with accrued interest

[Mike or Penny Novack]

Thank you. I had earlier discussed the issue in terms of "discount", but 
you are correct, this would be a "premium" situation. But similar in 
that NOT a capital gain or loss but interest INCOME being affected (the 
bond premium is like  negative interest income, that is, a debit instead 
of a credit).

Michael

> FWIW - this is what John M Hoffman & Associates CPAs has to say about 
> the subject.  nvsoar
> ____________________________
>
> /What is accrued interest purchased and what is the tax implication?/
>
>    Most bonds pay interest every six months. This is the coupon date.
>    Let's say that you purchase a $10,000 bond paying 6% interest that
>    will mature on September 30, 2015. Every March 31 and September 30
>    until (and including) September 30, 2015 the bond issuer pays
>    interest at the stated rate of the bond (the coupon rate). In this
>    case that amount is $300 (6% times $10,000 for one half a year).
>
>    If you buy that bond on September 15, you will be the one that gets
>    that full coupon payment representing six months of interest on
>    September 30. Sounds like a great deal. Not so fast. Not that it is
>    a good deal or a bad deal but what occurs is a fair deal. When you
>    buy that bond, you will pay the seller the interest from the
>    previous coupon date through the purchase date. In this case
>    essentially 5 and 1/2 months of interest.
>
>    This amount that you pay is the accrued interest purchased. In this
>    case that amount would be approximately $250. In a perfectly simple
>    world, you would pay $10,250 to acquire the bond, $250 of that being
>    for the accrued interest.
>
>    On September 30, you receive a coupon payment for $300. This $300
>    payment is reported as interest income to you. At tax time we will
>    want to report the $250 of accrued interest purchased as an offset
>    to your $300 of interest income, essentially netting out to the $50
>    that you actually received.
>
>    In the subsequent year things will be very simple, two coupon
>    payments of $300 each and the resulting $600 being the interest
>    received and taxable for that year.
>    ________________
>
>
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