Premium on Bonds Payable
A) has a debit balance.
B) is a contra account.
C) is considered to be a reduction in the cost of borrowing.
D) is deducted from bonds payable on the balance sheet.

Question

Quizplus · Accepted Answer

Premium on Bonds Payable is the excess of the issue price over the face value of the bond. It represents a reduction in the cost of borrowing as the company is receiving more money from investors than it has to pay back. It is not a contra account, and it has a credit balance. It is not deducted from bonds payable on the balance sheet.