On December 31,2018,Restaurant Sales has a Bonds Payable balance of $72,000 and a Premium on Bonds Payable balance of $4000.On the balance sheet,how will this information be shown?

Question

Quizplus · Accepted Answer

The Bonds Payable balance of $72,000 and the Premium on Bonds Payable balance of $4000 are both liabilities, but they represent different aspects of the bond issuance. The Bonds Payable balance represents the principal amount of the bonds that Restaurant Sales owes to its bondholders. The Premium on Bonds Payable represents the amount that the bondholders were willing to pay over the face value of the bonds, which is often due to the bond's higher-than-market interest rate or other favorable features.

Thus, the balance sheet would show the Bonds Payable balance of $72,000 as a liability, and the Premium on Bonds Payable balance of $4000 as a separate liability. The total liability for the bond issuance would be the sum of these two balances, which is $76,000. Therefore, choice D is the correct answer.

On December 31,2018,Restaurant Sales Has a Bonds Payable Balance of $72,000