Expert Answer 100% (2 ratings) Previous question Next question Transcribed Image Text from this Question. Premium on bonds payable definition bond issued at premium accounting detailed with balance sheet cliffs notes. More than $500,000 C. Less than $500,000 D. Contra Liability Account: A liability account that is debited in order to offset a credit to another liability account. A. The bonds were issued at 94 and pay interest on January 1 and July 1. If we assume that investors pay $4,900,000 for the bonds, the difference of $100,000 will be recorded by the issuer as a debit to the contra liability account Discount on Bonds Payable. Discount On Bonds Payable Quizlet. 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. The difference is premium/discount on bonds payable, which will impact the bonds carrying value presented in the balance sheet. Match. QUESTION 1 The premium on bonds payable is a contra liability account. Created by. The price of a bond issue often differs from its face value. Immediately after the bonds are issued, the bonds will have a carrying value of $306,000 ($300,000 PLUS $6,000). (2 days ago) Discount on bonds payable is a contra account to bonds payable that decreases the value of the bonds and is subtracted from the bonds payable in the long‐term liability section of the balance sheet. The current market rate of interest is 11%. B. A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. b. is a contra account. Test. should be reported on the balance sheet as a deduction from the related bonds payable, If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be. 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. B) is a contra account. Example of Premium on Bonds Payable. On January​ 1, 2017​, Delaney Corporation issued five​-year, 2% bonds payable with a face value of $2,600,000. Premium on bonds payable is the excess amount by which bonds are issued over their face value. Use the straight-line method to account for a bond issued at a premium. What is Premium on Bonds Payable? Premium on Bonds Payable: has a debit balance. D) is deducted from bonds payable on the balance sheet. Contra asset account. Write. Current bond market price. All about Bonds! Premium on bonds payable is a. a contra account. Long-Term Liabilities 66. Both discount on bonds payable and premium on bonds payable are valuation accounts. A. Initially it is the difference between the … Discount on Bonds Payable is a contra liability account. b. reported as a reduction of the bond liability. Discount on bonds payable is a contra-liability account, which is subtracted from bonds payable. C. Bonds may be converted to common stock at the option of the issuer. B. Unearned revenue. Which of the following describes the characteristics of a callable bond? To determine the discount on a bond the issuing value is deducted from the par value of the bonds. The generally accepted method of accounting for gains or losses from the early extinguishment of debt is to compute them as Premium on bonds payable. Adjunct Account: An account in financial reporting that increases the book value of a liability account. Liabilities: Bond Payable. Sariyeela PLUS. 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