Premium on bonds payable:
A)Is an asset account.
B)Increases the carrying value of the liability.
C)Is a contra-asset account.
D)Is disclosed by a footnote.

Question

Quizplus · Accepted Answer

Premium on bonds payable is a liability account representing the excess of the issue price over the face value of the bonds. It increases the carrying value of the liability. So, option B is the correct choice. Option A is incorrect because it is not an asset account. Option C is incorrect because a contra-asset account would decrease the carrying value of the related asset, but premium on bonds payable is a liability. Option D may or may not be true, but it is not directly relevant to the concept of premium on bonds payable.

Premium on Bonds Payable