Bond discounts should be amortized to comply with the
A)cost principle.
B)matching principle.
C)revenue recognition principle.
D)full disclosure principle.

Question

Quizplus · Accepted Answer

Bond discounts represent the difference between the face value of the bond and its selling price. To comply with the matching principle, which requires expenses to be recognized in the same period as the related revenues, the bond discount should be amortized over the life of the bond. This means that each year, a portion of the bond discount will be recorded as interest expense, which increases the cost of borrowing over time. This treatment ensures that the total cost of the bond is recognized over its lifetime, rather than at the time of issuance.

Bond Discounts Should Be Amortized to Comply with the