Question

E14.2 (LO 1) (Classification) The following items are found in the financial statements. a. Discount on bonds payable. b. Interest expense (credit balance). c. Unamortized bond issue costs. d. Gain on repurchase of debt. e. Mortgage payable (payable in equal amounts over next 3 years). f. Debenture bonds payable (maturing in 5 years). g. Notes payable (due in 4 years). h. Premium on bonds payable. i. Bonds payable (due in 3 years).

Answer 1

a. Discount on bonds payable—Contra account to bonds payable on balance sheet. b. Interest expense (credit balance)—Reclassify to interest payable on balance sheet. c. Unamortized bond issue costs—Classified as part of long-term liabilities on balance sheet. d. Gain on repurchase of debt—Classify as part of other gains and losses on the income statement. e. Mortgage payable—Classify one-third as current liability and the remainder as long-term liability on balance sheet. f. Debenture bonds—Classify as long-term liability on balance sheet. g. Notes payable—Classify as long-term liability on balance sheet. h. Premium on bonds payable—Classify as adjunct account to Bonds payable on balance sheet. i. Bonds payable—Classify as long-term liability on balance sheet.

Step-by-step explanation:

A financial statement is commonly known as detailed records that show the business and financial activities of an organization. It shows the cash inflow and outflow of an organization. There are different items in a financial statement. Examples of such items are investments/distributions by the owner, assets/liabilities, income, and revenue/expenses.