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

[Larry Evans]

On 03/06/2015 09:02 AM, Mike or Penny Novack wrote:
> 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.

When the bond is redeemed, I get $10,000.  Is the cost basis
$10,000 or $10,000+accrued_interest = $10,250?

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