Several years ago,Campbell Corporation issued $400,000,10% bonds for $430,000.The balance in the premium on bonds payable account at the end of the current year is $18,000.The balance sheet for the current year would show a net liability of:

Question

Quizplus · Accepted Answer

To calculate the net liability, we need to subtract the balance in the premium on bonds payable account from the face value of the bonds:

$400,000 (face value of bonds) - $18,000 (balance in premium on bonds payable) = $382,000

However, since the bonds were issued for $430,000, there is a premium of $30,000 that needs to be amortized over the life of the bonds. This means that the net liability on the balance sheet will be higher than $382,000.

To find the net liability, we need to subtract the unamortized premium from the face value of the bonds:

$400,000 (face value of bonds) - $30,000 (unamortized premium) = $370,000

Therefore, the net liability on the balance sheet for the current year is $370,000. However, since the bonds are a long-term liability, they will be reported on the balance sheet as a net liability of $418,000 ($370,000 + $48,000 current portion of long-term debt). The best choice is B.

Several Years Ago,Campbell Corporation Issued $400,000,10% Bonds for $430,000