Question

Wertz Corporation issued ten-year, 8% bonds on January 1, 2017 at a discount. During 2017, the company's accountant failed to amortize any of the bond discount. The omission of the discount amortization will

Answer 1

Wertz Corporation

Omission of the discount amortization will:

increase the net income by the amount of the discount that should have been amortized in the year ended December 31, 2017.

Step-by-step explanation:

Wertz's bond discount represents a loss to the corporation that should be written off over the life of the bond. If the 2017 discount amortization is omitted, the net income is increased by the amount of the discount amortization expense. This means that the income is overstated by that amount. If this omission is discovered before the issuance of the financial reports, it should be reflected in the accounts. If not, depending on its materiality, this amount must be reflected by restating the 2017 financial statements.