The Adjusting Entry to Record the Amortization of a Discount

question 111

Multiple Choice

The adjusting entry to record the amortization of a discount on bonds payable is

• A) debit Discount on Bonds Payable, credit Interest Expense
• B) debit Interest Expense, credit Discount on Bonds Payable
• C) debit Interest Expense, credit Cash
• D) debit Bonds Payable, credit Interest Expense

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Definitions:

Creditor

An individual or institution that lends money or extends credit to another party, known as the debtor.

Lien

A legal right or interest that a lender holds in the debtor's property, serving as security for the repayment of a debt.

Chapter 11

A provision of the United States Bankruptcy Code that allows businesses to reorganize and restructure debt under court supervision while continuing operations.

Plan of Reorganization

A financial and operational strategy used by companies emerging from bankruptcy to restructure and revitalize their operations, debt, and equity.