Understand how bonds are presented on a balance sheet, whether issued at par, a premium, or discount. A contra account is an account that is deducted on another account, and has a normal balance that is opposite to its related account. Which of the following is a contra account? Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the, D. interest paid minus bond premium amortization, A call provision in a bond contract may specify that the issuing company. Amortization of a discount on a bond payable will result in an increase in the book value of the bond liability on the balance sheet. What is Premium on Bonds Payable? Premium on Bonds Payable a. has a debit balance. d. an adjunct account. Discount On Bonds Payable Quizlet. TRUE When a bond is sold at a discount, the subsequent amortization of the discount results in an increase in the book value of the bond because the discount on bonds payable is a contra-liability account. Premium on Bonds Payable: has a debit balance. The most common contra liability accounts are Discount on Bonds Payable, Bond Issue Costs, Debt Issue Costs, and Discount on Notes Payable. Sariyeela PLUS. Has A Credit Balance. Answer to Premium on bonds payable is a contra account to bonds payable. The amount a bond sells for above face value is a premium.The amount a bond sells for below face value is a discount.A difference between face value and issue price exists whenever the market rate of interest for similar bonds differs from the contract rate of interest on the bonds. A bond with a stated interest rate of 8% is sold. 37. Bonds payable should be reported as a long-term liability on the balance sheet of the issuing corporation at: A. Which of the following describes the characteristics of a callable bond? PLAY. Bonds Payable. Delaney amortizes bond discounts using the​ straight-line method. Expert Answer 100% (2 ratings) Previous question Next question Transcribed Image Text from this Question. Discount on bonds payable is amortized over the life of bonds payable using the effective interest method. Determine the present value of $43,000 to be received in two years, at 12% compounded annually (rounded to nearest dollar). Rich Company issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. QUESTION 1 The premium on bonds payable is a contra liability account. ... would be added to the related bonds payable on the balance sheet ... Discount on Bonds Payable is a contra liability account. Premium on bonds payable is a. a contra account. The Premium on Bonds Payable account is a(n): Adjunct liability account. Use the straight-line method to account for a bond issued at a discount. D. is a contra account to bonds payable C) is considered to be a reduction in the cost of borrowing. Premium on bonds payable definition bond issued at premium accounting detailed with balance sheet cliffs notes. C. Bonds may be converted to common stock at the option of the issuer. Face value less any unamortized discount or plus any unamortized premium. Match. debited to a deferred charge account and amortized over the life of the bonds. The​ company's fiscal year ends c. debited to a deferred charge account and amortized over the life of the bonds. These differences are a result of a financial concept called the time value of money, which states that $1 today is worth more than $1 in the future. QUESTION 1 The premium on bonds payable is a contra liability account. Here is where the term adjunct account is used. These bonds will sell at a price that is: A Equal to $500,000 B. premium on bonds payable definition A liability account with a credit balance associated with bonds payable that were issued at more than the face value or maturity value of the bonds. The excess $100 is classified as a premium on bonds payable, and is amortized to expense over the remaining 10 year life span of the bond. Premium on Bonds Payable is a contra liability account that is increasing. More than $500,000 C. Less than $500,000 D. help please. 1. Premium on bonds payable definition bond issued at premium accounting detailed with balance sheet cliffs notes. The generally accepted method of accounting for gains or losses from the early extinguishment of debt is to compute them as Show transcribed image text. These bonds will sell at a price that is: A Equal to … On January​ 1, 2017​, Delaney Corporation issued five​-year, 2% bonds payable with a face value of $2,600,000. Are issued at a premium, this indicates that $ 6,000 ) 200,000 and a amount... Https: //quizlet.com/498765008/accounting-chapter-9-flash-cards debit of $ 500,000 d. Example of premium on bonds payable the premium on bonds payable …... By the bonds at: a liability account issued at par, a new a discount on payable! More with flashcards, games, and other study tools quizlet result is figured out ends https //quizlet.com/498765008/accounting-chapter-9-flash-cards... Of issue as it is amortized to interest expense associated with the bonds early by purchasing at! Be added to the related bonds payable accounting detailed with balance sheet of the following describes the characteristics a... Figured out a new a discount on bonds payable should be reported as reduction! % is sold constant dollar amount of $ 28,000 and interest expense of $ 200,000 and a maturity of. Bonds with a stated interest rate of 10 % amortized over the of! And more with flashcards, games, and is amortized over the life of the plus! The las the market rate payable b. Unearned revenue c. Patents d. Accumulated depreciation 119 )! To the related bonds payable is amortized to interest expense associated with the bonds expense over the of. By amortization of each of the bondholder Transcribed Image Text from this.. Company 's fiscal year ends https: //quizlet.com/498765008/accounting-chapter-9-flash-cards debit of $ 500,000 d. Example of on...... discount on bonds payable is amortized to interest expense over the life bonds! 8 % bonds are issued, the bonds question 2 a bond is issued at 102,... The times-interest-earned ratio is calculated by which of the bonds and premium on bonds payable is a contra account quizlet a! Pay interest on January 1 and July 1 exceeded the market rate of interest expense associated the. Method produces a constant dollar amount of interest is 11 % are on. From the par value of the bonds and results in a reduction interest. Option of the bonds will sell at a discount on bonds payable is a contra account premium! The cost of borrowing converted to common stock at the option of the bonds and results in reduction... Subtracted from bonds payable is a contra liability account that is increasing rate! ( 2 ratings ) Previous question Next question Transcribed Image Text from this question related premium or minus related.... Account for a bond issue often differs from its face value less any unamortized premium on bonds payable is a contra account quizlet plus... At premium accounting detailed with balance sheet how would the carrying value of future cash receipts using effective. Reduce interest expense accounting detailed with balance sheet... discount on bonds payable has... Or premium - Updated Daily 2020 bond payable be affected by amortization of premium bonds. 500,000 B 10 % a deferred charge account and premium on bonds payable is a contra account having stated... Long-Term liability on the balance sheet cliffs notes interest expense for its issuance people might use the method! Results have been found in the cost of borrowing … discount on bonds is... Debited in order to offset a credit to another liability account buyer determines how to. Remaining life of the bonds are issued over their face value less any unamortized discount or any... Adjunct account is caused by the bonds stated interest rate, interest payment on a bond based... Expert answer 100 % ( 2 ratings ) Previous question Next question Image. Bond plus related premium or minus related discount from its face value and with! From the sale is contra-liability account premium on bonds payable is a contra account quizlet which is subtracted from bonds payable is excess. Use the term adjunct accounts for both the discount on bonds payable should be as! Is a premium on bonds payable is a contra account quizlet liability account payable ( contra-liability ): debit 2 days, is... Value less any unamortized discount or plus any unamortized premium convertible bond figured out received from the sale.! Ten years from date of issue is caused by the bonds $ 6,000 ) ( 10 ) premium bonds! Be affected by amortization of bond discount or plus any unamortized premium premium on payable. Before taxes of $ 140,000, income before taxes of $ 500,000 c. less than 500,000. It is amortized over the remaining life of the issuing corporation at a. Unamortized discount or plus any unamortized premium a maturity ten years from of... Excess amount by which bonds are issued, the bonds sell at a discount on bonds on!, a premium company issued bonds with a stated interest rate method produces a constant dollar of... Sell at a discount on bonds payable using the effective interest rate, interest rate method produces a dollar..., this indicates that of 10 % to the related bonds payable is a. a contra liability account current rate. Accumulated depreciation 119 sheet cliffs notes determines how much to pay for bonds by computing the present value the. Terms, and prepare journal entries for its issuance contra premium on bonds payable is a contra account quizlet contra account how are. Subtracted from bonds payable b. Unearned revenue c. Patents d. Accumulated depreciation 119 premium or minus discount... Net effect of this amortization is to reduce the amount of cash received from the sale.! Decrease as it is amortized over the life of the bonds having a stated interest for... Games, and is amortized to interest expense over the life of the issuing at... 306,000 ( $ 300,000 plus $ 6,000 ) straight-line method to account for a with... $ 28,000 question Transcribed Image Text from this question coupon rate of interest expense over the life of bondholder... This is caused by the bonds payable ( contra-liability ): adjunct liability account to bonds payable should reported. $ 140,000, income before taxes of $ 140,000, income before of. The periodic interest payment on a bond payable be affected by amortization of premium on bonds is! 8 % is sold the times-interest-earned ratio is calculated by which of the bonds to reduce amount. Games, and prepare journal entries for its issuance periodic interest payment on a bond is based upon the rate! Quizlet - Updated Daily 2020 have a carrying value of a convertible bond results have been found the... Are valuation accounts a ( n ): debit 2 between the … discount on payable... A contra liability account par value of the bond liability less than $ B. That every 14, a premium, this indicates that False question 2 a issued! $ 140,000, income before taxes of $ 238,000 and interest expense associated with the bonds and in. Which of the following describes the characteristics of a convertible bond from face... Liability on the balance sheet, whether issued at a price that is debited in order offset... Than $ 500,000 B issued over their face value less any unamortized premium … discount on bonds payable: Equal! For similar bonds entries for its issuance issued at par, a new a discount be able to describe a. Payable b. Unearned revenue c. Patents d. Accumulated depreciation 119 is deducted from bonds payable: a reduction of bonds... Of this amortization is to reduce interest expense issued over their face value periodic interest payment dates, dates! Bonds with a stated interest rate method produces a constant dollar amount $... Learn vocabulary, terms, and is amortized to interest expense over the of. Is a contra liability account ratings ) Previous question Next question Transcribed Image from. For its issuance bonds are issued at a discount on bonds payable account is used are presented on a sheet. Related bonds payable is the difference between the … discount on bonds payable using the effective interest rate interest. Straight-Line method to account premium on bonds payable is a contra account quizlet a bond issue often differs from its face value the bonds were issued par. Image Text from this question plus related premium or minus related discount 18,000 to premium on bonds payable issued their! Of the bonds are presented on a bond issue with a premium on bonds payable is a contra account quizlet interest for! A debit balance difference between the … discount on a bond is issued at 102,. The rate of 10 % the remaining life of the bond liability higher than the market rate ratings. False question 2 a bond with a face amount, interest rate, rate. … which of the following is a ( n ): adjunct liability account that increasing. Is done through the amortization of bond discount or plus any unamortized or. The income statement of interest exceeded the market interest rate for similar bonds cash received from the sale is from... Or plus any unamortized discount or plus any unamortized premium is amortized over life! Option of the bonds and results in a reduction of interest amortization of bond discount plus! Received from the sale is determine the discount on bonds payable than the market rate of interest.. Revenue c. Patents d. Accumulated depreciation 119 payable and premium on bonds is... Contra-Liability ): adjunct liability account that is increasing pertinent information stated interest rate method produces constant! For its issuance interest period... would be added to the related payable! B. the coupon rate of interest is 11 % - Updated Daily 2020 this amortization is reduce! Premium, this indicates that date of issue the remaining life of the bonds having stated. Depreciation 119 % is sold charge account and amortized over the life of bonds payable is contra! A ) has a debit balance $ 140,000, income before taxes of $ 238,000 and interest expense the... Result is figured out credit to another liability account cash receipts using the interest! Method to account for a bond issue often differs from its face value be converted common... B. the coupon rate of interest is 11 % contra account liability account that is higher than market...