Bond Interest Expense

 

 

Bond Interest Expense

Bond interest expense is the amount of interest related to bonds payable shown in the income statement. For a company that issues bonds, it is the cost of borrowing funds. Bond interest expense per annum is calculated by multiplying the coupon interest rate with the face value of a bond. To calculate the total interest expense over the life of a bond, the per annum interest expense is multiplied by the term of the bond.

For example, a bond with a face value of $1,000 and 10% coupon interest rate paid annually and having 10 years to maturity, the bond interest expense per annum for a bond with such terms will be $100 [$1,000 x 10%] and the total interest expense will be $1,000 [$100 x 10]. It also includes the additional costs incurred when a bond is sold at discount or the reduction in costs when a bond is sold at a premium.

 

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