Which of the Following Is TRUE of a Discount on Bonds

question 130

Multiple Choice

Which of the following is TRUE of a discount on bonds payable?

• A) A discount on bonds payable is added to the bonds payable balance and shown with long-term liabilities on the balance sheet.
• B) A discount on bonds payable is subtracted from the bonds payable balance and shown with the current liabilities on the balance sheet.
• C) A discount on bonds payable is added to the bonds payable balance and shown with owner's equity on the balance sheet.
• D) A discount on bonds payable is subtracted from the bonds payable balance and shown with long-term liabilities on the balance sheet.

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Definitions:

Common Stockholders

Common stockholders are investors who own shares of a company's common stock, granting them the right to vote at shareholder meetings and receive dividends.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts, providing for the reorganization or liquidation of the debtor's assets to pay off creditors.

Constant Growth Model

A dividend discount model that assumes dividends will increase at a constant growth rate indefinitely, useful for valuing stocks.

Gordon Model

A dividend discount model that values a stock by considering future dividends that grow at a constant rate, also known as the Gordon Growth Model.