Which of the following is TRUE of a premium on bonds payable?
A) A premium on bonds payable is added to the bonds payable balance and shown with long-term liabilities on the balance sheet.
B) A premium on bonds payable is added to the bonds payable balance and shown with owner's equity on the balance sheet.
C) A premium on bonds payable is subtracted from the bonds payable balance and shown with long-term liabilities on the balance sheet.
D) A premium on bonds payable is subtracted from the bonds payable balance and shown with the current liabilities on the balance sheet.

Question

Quizplus · Accepted Answer

A premium on bonds payable is added to the bonds payable balance because it represents the amount received in excess of the bond's face value. It is shown with long-term liabilities on the balance sheet because it is a long-term liability that will not be due for payment until future years.

Which of the Following Is TRUE of a Premium on Bonds