Bonds are issued between interest payment dates. Which accounting treatment is correct?
Buyer pays the issuer accrued interest since the last coupon; the bond price and accrued interest are recorded separately
Issuer records the entire cash received as bond proceeds; accrued interest is ignored until the next coupon date
Accrued interest is added to the bond discount or premium and amortized over the remaining life
The issue price is reduced by accrued interest and no separate liability is recorded