Long-Term Liabilities 66. Premium on bonds payable definition bond issued at premium accounting detailed with balance sheet cliffs notes. Since a credit balance is the normal balance for a liability account, the account Premium on Bonds Payable cannot be referred to as a contra account. Answer to Premium on bonds payable is a contra account to bonds payable. B. Spell. Created by. Premium on bonds payable (or bond premium) occurs when bonds payable are issued for an amount greater than their face or maturity amount. The times-interest-earned ratio is calculated by which of the following? Bonds Payable is a liability account that is increasing. B. the coupon rate of interest exceeded the market rate. Face amount, interest rate, interest payment dates, maturity dates. Bonds payable should be reported as a long-term liability on the balance sheet of the issuing corporation at: A. All about Bonds! The generally accepted method of accounting for gains or losses from the early extinguishment of debt is to compute them as Which of the following statements is true? Expert Answer 100% (2 ratings) Previous question Next question Transcribed Image Text from this Question. true false. Although it may not seem so, the $103,769 is the $105,000 from above and the $3,679 is the $5,000 from above. The premium on bonds payable is amortized to interest expense over the life of the bonds and results in a reduction of interest expense. d. an adjunct account. B. Unearned revenue. Some people might use the term adjunct accounts for both the Discount on Bonds Payable … Start studying Exam 3 review. More than $500,000 C. Less than $500,000 D. a. ... would be added to the related bonds payable on the balance sheet ... Discount on Bonds Payable is a contra liability account. Use the following table, if needed. Gravity. Bond prices and interest rates. 37. This amount must be amortized over the life of bonds, it is the balancing figure between interest expense and interest paid to investors (Please see the example below). Has A Credit Balance. Contra revenue account. Issuing Bonds Payable at a Premium After posting, the bond accounts have the following balances: Smart Touch Learning reports these bonds payable on the balance sheet as follows: Straight-Line Amortization of Bond Premium The beginning premium is $4,100, and there are 10 semiannual interest periods during the bonds’ five-year life. Premium on bonds payable is the excess amount by which bonds are issued over their face value. c. debited to a deferred charge account and amortized over the life of the bonds. Which of the following is a contra account? Revenue account. Contra asset account. Both discount on bonds payable and premium on bonds payable are valuation accounts. C. Patents. premium on bonds payable definition. This is done through the amortization of premium on bonds payable. The price of a bond issue often differs from its face value. The premium on bonds payable A. C) is considered to be a reduction in the cost of borrowing. Discount On Bonds Payable Quizlet. True False 33. C. Bonds may be converted to common stock at the option of the issuer. Initially it is the difference between the … Use the straight-line method to account for a bond issued at a premium. What are the three components of a bond? Example of Premium on Bonds Payable. D. Face value less any unamortized discount or plus any unamortized premium. Test. True False. True False QUESTION 2 A bond issue with a face amount of $500,000 bears interest at the rate of 10%. Here is where the term adjunct account is used. Flashcards. These bonds will sell at a price that is: A Equal to $500,000 B. STUDY. Discount on Bonds Payable is a contra liability account. Which of the following describes the characteristics of a callable bond? What is Premium on Bonds Payable? The effective interest rate method produces a constant dollar amount of interest expense to be reported each interest period. The carrying amount of a bond liability that appears on the balance sheet is the A. call price of the bond plus bond discount or minus bond premium. The balance in Premium on Bonds Payable. D. may buy back bonds from the investors. Premium on bonds payable is a. a contra account. To determine the discount on a bond the issuing value is deducted from the par value of the bonds. C. increases the cash interest payment. Bonds payable should be reported as a long-term liability on the balance sheet of the issuing corporation at: A. 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. Premium on bonds payable b. Unearned revenue c. Patents d. Accumulated depreciation 119. Equity account. 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. True False QUESTION 2 A bond issue with a face amount of $500,000 bears interest at the rate of 10%. 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. This problem has been solved! Premium on Bonds Payable: has a debit balance. 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. The entry eliminates the $9,800 book value of the bonds from the accounts by debiting Bonds Payable for $10,000 and crediting Discount on Bonds Payable for $200 (remember, discount on bonds payable is a contra-liability account and has a normal debit balance). 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. D. Accumulated depreciation. A form of interest-bearing note. The net effect of this amortization is to reduce the amount of interest expense associated with the bonds. The Premium on Bonds Payable account is a(n): Adjunct liability account. Terms in this set (22) Bond. Be able to describe when a bond is issued at a discount, and prepare journal entries for its issuance. b. reported as a reduction of the bond liability. A contra liability account is a liability account where the balance is expected to be a debit balance.Since a debit balance in a liability account is contrary to the normal credit balance, the account is referred to as a contra liability account.. If the bonds were issued at a premium, this indicates that. The market rate of interest is lower than the stated interest rate, Bonds will always fall into all but which one of the following categories? Discounts on Bonds payable should be presented in the financial statements of the bond issuer as a(n), The market interest rate on bonds is higher than the coupon rate when bonds sell. 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%. Premium on Bonds Payable is a contra liability account that is increasing. c. debited to a deferred charge account and amortized over the life of the bonds. 37. https://quizlet.com/498765008/accounting-chapter-9-flash-cards Which of the following describes the characteristics of a convertible bond? A. QUESTION 1 The premium on bonds payable is a contra liability account. 2. B. face value of the bond plus related premium or minus related discount. Premium on bonds payable is: an adjunct account. The straight-line method is adopted for the amortization of bond discount or premium. Show transcribed image text. D) is deducted from bonds payable on the balance sheet. B. C. Earnings before interest and taxes divided by interest expense. 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. debited to a deferred charge account and amortized over the life of the bonds. a. Is A Contra Account To Bonds Payable. Liabilities: Bond Payable. B) is a contra account. Over the life of the bonds the debit balance in Discount on Bonds Payable will decrease as it is amortized to Interest Expense. Discount on bonds payable is amortized over the life of bonds payable using the effective interest method. a contra account. If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is. Sariyeela PLUS. c. debited to a deferred charge account and amortized over the life of the bonds. 1. Rich Company issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If $500,000 of 10-year bonds, with interest payable semiannually are sold for $494,040 based on (1) the present value of $500,000 due in 20 periods at 5% plus (2) the present value of twenty $25,000 payments at 5%, the nominal or contract rate and the market rate of interest for the bonds are both 10%. When graphing the carrying value of a premium bond vs the par value of a premium bond, the lines intersect at the maturity date of the bond. PLAY. Premium on bonds payable is a. a contra account. This is caused by the bonds having a stated interest rate that is higher than the market interest rate for similar bonds. 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. d. is deducted from bonds payable … Current bond market price. The current market rate of interest is 11%. Over the life of the bonds the debit balance in Discount on Bonds Payable will decrease as it … b. reported as a reduction of the bond liability. Face value less any unamortized discount or plus any unamortized premium. Discount on bonds payable is a contra-liability account, which is subtracted from bonds payable. Write. The current market rate of interest is 11%. Serves to reduce interest expense on the income statement B. serves to increase interest expense on the income statement. Duncan Corporation reported net income of $140,000 , income before taxes of $238,000 and interest expense of $28,000. This is classified as a liability, and is amortized to interest expense over the remaining life 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. On January 1, 2017, Delaney Corporation issued five-year, 2% bonds payable with a face value of $2,600,000. A contra account is an account that is deducted on another account, and has a normal balance that is opposite to its related account. Premium on bonds payable definition bond issued at premium accounting detailed with balance sheet cliffs notes. (10) Premium on bonds payable is a. a contra account. Increase in discount on bonds payable (contra-liability): debit 2. How would the carrying value of a bond payable be affected by amortization of each of the following? t 90 days, which means that every 14, a new a discount on bonds payable quizlet result is figured out. The buyer determines how much to pay for bonds by computing the present value of future cash receipts using the contract rate of interest. A. On December 31, 2019, Delaney retired the bonds early by purchasing them at a market price of 95. 32. The bonds were issued at 94 and pay interest on January 1 and July 1. Delaney amortizes bond discounts using the straight-line method. Immediately after the bonds are issued, the bonds will have a carrying value of $306,000 ($300,000 PLUS $6,000). D. is a contra account to bonds payable 1. Which of the following is a contra account a Premium on bonds payable b from MIS 201 at Saudi Electronic University help please. (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. A bond with a stated interest rate of 8% is sold. 3. reported as a reduction of the bond liability. Discount on bonds payable is a contra liability account and premium on bonds payable is an adjunct account. Premium on Bonds Payable: A) has a debit balance. CODES (1 months ago) A discount on bonds payable quizlet - Updated Daily 2020. 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. An adjunct account is a valuation account from … Match. The company's fiscal year ends b. is a contra account. Premium on Bonds Payable a. has a debit balance. These bonds will sell at a price that is: A Equal to … Learn vocabulary, terms, and more with flashcards, games, and other study tools. Understand how bonds are presented on a balance sheet, whether issued at par, a premium, or discount. CODES (3 months ago) 7 new a discount on bonds payable quizlet results have been found in the las. Bonds Payable. See the answer. Contra Liability Account: A liability account that is debited in order to offset a credit to another liability account. Use the straight-line method to account for a bond issued at a discount. A. Callable or convertible. If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is. debit of $18,000 to Premium on Bonds Payable. Which of the following is a contra account? The most common contra liability accounts are Discount on Bonds Payable, Bond Issue Costs, Debt Issue Costs, and Discount on Notes Payable. To determine the six-month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond. The difference is premium/discount on bonds payable, which will impact the bonds carrying value presented in the balance sheet. Bonds may be converted to common stock at the option of the bondholder. b. reported as a reduction of the bond liability. Since a debit balance in a liability account is contrary to the normal credit balance, the account is referred to as a contra liability account. 16. c. is considered to be a reduction in the cost of borrowing. Face value less any unamortized discount or plus any unamortized premium. Which of the following is not a method of disclosing pertinent information? At the time, the market rate is lower than 8%, so investors pay $1,100 for the bond, rather than its $1,000 face value. Serves to reduce interest expense on the income statement. QUESTION 1 The premium on bonds payable is a contra liability account. Premium on bonds payable. What is a contra liability account? The periodic interest payment on a bond is based upon the market rate of interest. Learn. Discount on Bonds Payable is a contra liability account. 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