Discount on Notes Payable should be classified as a

Question

Quizplus · Accepted Answer

Discount on Notes Payable represents the amount by which the maturity value of the notes payable exceeds its issue price. It is considered as a contra account to Notes Payable and is reported as a deduction from the face value of Notes Payable in the balance sheet. It reflects the interest expense that has been recognized in advance and will be amortized over the life of the notes payable. Therefore, the correct choice is B, a contra account to Notes Payable.

Discount on Notes Payable Should Be Classified as a