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

Question

Quizplus · Accepted Answer

A discount on bonds payable is subtracted from the bonds payable balance and shown with long-term liabilities on the balance sheet. This is because a discount on bonds payable represents the difference between the face value of the bonds and the amount the bonds were sold for, and is therefore a reduction of the liability amount.

Which of the Following Is TRUE of a Discount on Bonds