Johansen Company issued a bond at a discount.Which of the following choices accurately reflects how the issue would affect June's financial statements?

Question

Quizplus · Accepted Answer

When a bond is issued at a discount, the amount received from the sale of the bond will be lower than its face value. This will result in a lower cash inflow, which will decrease the company's assets (Cash) on the balance sheet. Additionally, the discount on the bond will be recorded as a liability (Discount on Bonds Payable), which will increase the company's liabilities on the balance sheet. Therefore, the option that accurately reflects the effect of the bond issuance at a discount on the financial statements is option B.

Johansen Company Issued a Bond at a Discount