Eagle Company issued 10-year bonds at 96 during the current year. In the year-end financial statements, the discount should be:
A) Deducted from bonds payable.
B) Added to bonds payable.
C) Included as an expense in the year of issue.
D) Reported as a deferred charge.

Question

Quizplus · Accepted Answer

The discount on bonds payable represents the difference between the face value and sale price of bonds, which is treated as a contra-liability account. As such, it should be deducted from bonds payable in the year-end financial statements.

Eagle Company Issued 10-Year Bonds at 96 During the Current