Which of the following is TRUE of the Discount on Bonds Payable account? The bonds are due in ten years.
A) It is added to the Bonds Payable balance and shown with long-term liabilities on the balance sheet.
B) It is subtracted from the Bonds Payable balance and shown with the current liabilities on the balance sheet.
C) It is added to the Bonds Payable balance and shown with stockholders' equity on the balance sheet.
D) It is subtracted from the Bonds Payable balance and shown with long-term liabilities on the balance sheet.

Question

Quizplus · Accepted Answer

The Discount on Bonds Payable account represents the difference between the face value of the bonds and the amount for which they were issued. It is a contra account to the Bonds Payable account, meaning it is subtracted from the Bonds Payable balance on the balance sheet. The Bonds Payable balance, along with any related discount or premium, is shown with long-term liabilities on the balance sheet because the bonds are due in ten years. Therefore, option D is correct.

Which of the Following Is TRUE of the Discount on Bonds