Module VI· Debt Schedule MechanicsAdvanced
Question
How do you treat original issue discount (OID) in the debt schedule?
Answer
OID means debt is issued below par. Cash proceeds are lower than face value, but debt principal is repaid at par. In accounting, OID is amortized as additional interest expense using the effective interest method. In models, show gross debt, net proceeds, financing fees / OID, cash interest, and amortization if EPS or book debt matters.