Which of the following is true of the Discount on Bonds Payable account? The bon

Question

Which of the following is true of the Discount on Bonds Payable account? The bonds are due in ten years. O A. It is added to the Bonds Payable balance and shown with long-term liabilities on the balance sheet O B. It is subtracted from the Bonds Payable balance and shown with the current liabilities on the balance sheet O C. It is subtracted from the Bonds Payable balance and shown with long-term liabilities on the balance sheet O D. It is added to the Bonds Payable balance and shown with stockholders' equity on the balance sheet

Explanation / Answer

Answer: Option C. It is subtracted from the Bonds Payable balance and shown with long-term liabilities on the balance sheet.

Discount on bonds payable being a contra-liability account with a debit balance, is shown on the balance sheet as a deduction from the bonds payable account. Since the bonds are due in ten years, it will be shown under the long-term liabilities.

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