A bond discount results in a liability on the balance sheet that is:
A)lower than the face value of the bond
B)higher than the face value of the bond
C)equal to the face value of the bond
D)there is no corresponding liability for the discount

Question

Quizplus · Accepted Answer

A bond discount occurs when the bond is sold for less than its face value. This results in a liability on the balance sheet that is lower than the face value of the bond. For example, if a bond with a face value of $1,000 is sold for $900, then the liability on the balance sheet would be $900, not $1,000. The difference between the face value and the selling price ($100 in this case) is recorded as a discount which is amortized over the life of the bond.

A Bond Discount Results in a Liability on the Balance