The discount on bonds payable
A)serves to reduce interest expense on the income statement.
B)serves to increase interest expense on the income statement.
C)is never allowed by investment bankers when debt is issued.
D)serves to increase the cash interest payment.
E)is an adjunct account to bonds payable.

Question

Quizplus · Accepted Answer

The discount on bonds payable represents the difference between the face value of the bond and the lower issuance price. This discount is amortized over the life of the bond, increasing the interest expense recognized on the income statement.

The Discount on Bonds Payable