Eagle Company issued ten-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 should be deducted from the bonds payable on the balance sheet, as it represents the difference between the bonds' face value and the amount received upon issuance. Deducting the discount reduces the bonds' carrying value to reflect the lower amount paid for them, and it is amortized over the bond's life as interest expense on the income statement. Therefore, options B, C, and D are incorrect.

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