...
When the principal payment is greater than the remaining amount of deferred market discount, record the system records the remaining amount as a reduction of current original cost.
Units | Current Original Cost | Def Market Discount | Cash Proceeds (at par) |
85,000 | 75,000 | 1,000 | 1,500 |
Proceeds In this scenario, proceeds are greater than remaining deferred amortization so the entire deferred amount will be is recorded as amortization income and book cost will be is reduced by the remainder. The remaining deferred amortization will be is reduced by the recorded amortization and will end ends at 0.
Units – Post | Current Original Cost – Post | Def Market Discount - Post |
83,500 | 74,500 | 0 |
...
If the principal payment is greater than the remaining cost and deferred market discount, record the system records the remaining amount as a capital gain.
Units | Current Original Cost | Def Market Discount | Cash Proceeds (at par) |
15,000 | 5,000 | 500 | 10,000 |
Proceeds In this scenario, proceeds are greater than remaining deferred amortization and the remaining book cost so the entire deferred amount will be is recorded as amortization income, book cost will be is reduced to zero, and the remainder will be recorded as a capital gain.
...