If a company sells its 20-year bonds at a discount, the discount account should be reported on the balance sheet as a(n)
A)unearned liability
B)addition to the bonds payable
C)accrued expense
D)deduction from bonds payable

Question

Quizplus · Accepted Answer

When a company sells its bonds at a discount, it means that the bonds are sold at a price lower than their face value. The discount account represents the difference between the face value of the bonds and the price at which they were sold. Therefore, it should be reported on the balance sheet as a deduction from bonds payable, which reduces the overall liability of the company.

If a Company Sells Its 20-Year Bonds at a Discount