Question

Cash $ 10 Accounts Receivable, net 20 Inventory 50 Long-term Investment 100 Equipment 520 Accumulated Depreciation 200 Accounts Payable $ 20 Bond Payable 100 Discount on Bond Payable 10 Capital Stock 200 Retained Earnings 120 Revenues 310 Expenses _240 _____ Totals $1,140 $760

Answer 1

Answer: d. Discount on Bonds Payable

Explanation:

When a bond is issued for a price that is lower than its par/ face value, the discount will be treated as a debit entry to an account called the Discount on Bonds Payable account.

This happens when a bond has a coupon rate that is lower than the market yield. It will lead to the bond being demanded at a lower price and it will be know as a Discount bond.