Question

Over the term of the bonds, the balance in the Discount on Bonds Payable account will_________.a. increase.b. decrease.c. fluctuate up and down if the market is volatile.d. be unaffected until the bonds mature.

Answer 1

Over the term of the bonds, the balance in the Discount on Bonds Payable account will decrease, Option B.

Step-by-step explanation:

Discount on bonds payable is also known as bond discount. It occurs if the bonds are issued for less than their maturity amount of the bond. If the bond is a liability which is long-term, it will appear on the balance sheet with the account Bonds payable.

"Discount on bonds payable" is the rate, at which you are discounting the bond. To calculate this, divide the discount amount by the 'face value' of the bond.