Is it added to or subtracted from the Bonds Payable charge to determine the carrying amount?

Question: What type of account is Discount on Bonds Payable? What is its average balance? Is it added to or subtracted from the Bonds Payable charge to determine the carrying amount?

Expert Solution

Step 1: Definition of carrying amount

The price at which the bond is purchased is known as the carrying amount of the bond.

Step 2: Discount on bonds payable

Discount on bonds payable is a contra liability account. Discount on payable is added to the bonds payable to determine the carrying amount of bonds. The discount on the payable bond charge is the debit balance

The difference between the face value and the selling price of the bonds is known as the discount on bonds payable.

Sahil Dangi answered 2 years ago

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