Business, 14.07.2020 18:01, rubal6

The balance in Discount on Bonds Payable a. would be added to the related bonds payable to determine the carrying amount of the bonds.
b. would be subtracted from the related bonds payable on the balance sheet.
c. should be reported on the balance sheet as an asset because it has a debit balance.
d. should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method.

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answered: consueloquintan1

b. would be subtracted from the related bonds payable on the balance sheet.

Explanation:

A bond is a fixed income instrument that represents the indebtedness of the borrower to the investor or creditor (bond issuer). They're basically loans that are given to large organizations or government.

This ultimately implies that, when an investor or creditor purchases a bond, an agreed amount of money is being borrowed to the issuer as a loan. Consequently, the bond issuer is expected to pay an interest with a return of principal at maturity to the holder (investor or creditor) of the bond.

Hence, bonds payable only arises when a company issues bonds so as to generate cash for its business and plans. Thus, the company is a borrower as the bond issuer while the holder of the bond is a debt-holder (investor or creditor). This further would mean that, the company becomes liable to the investor. Therefore, bonds payable should be recorded on the long-term liability side of the balance sheet being used by the company.

Bonds are issued at par or premium or discount and as such bond issuer records the face value of the bond as bonds payable.

Additionally, the balance in discount on bonds payable would be subtracted from the related bonds payable on the balance sheet because it decreases the value of the bonds.

answered: Guest

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answered: Guest

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The balance in Discount on Bonds Payable a. would be added to the related bonds payable to determin...