Asked by Olivia DiPaolo on Jun 03, 2024
Verified
Premium on Bonds Payable is a contra account to Bonds Payable.
Premium On Bonds
The amount by which the market value or sale price of a bond exceeds its face value, indicating that the bond was sold for more than its original issue price.
Contra Account
An account used in accounting to reduce the value of a related account; it has a balance opposite to the normal account balance.
- Determine the consequences of offering bonds at above or below par value on the book value of bonds.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
False
Explanation :
Premium on Bonds Payable is an adjunct account to Bonds Payable, meaning it is added to the Bonds Payable account on the balance sheet, not subtracted from it like a contra account would be.
Learning Objectives
- Determine the consequences of offering bonds at above or below par value on the book value of bonds.
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