Which of the Following Is TRUE of the Premium on Bonds

question 1

Multiple Choice

Which of the following is TRUE of the Premium on Bonds Payable account? (The bonds are due in ten years.)

• A) It is added to the Bonds Payable balance and shown with long-term liabilities on the balance sheet.
• B) It is added to the Bonds Payable balance and shown with stockholders' equity on the balance sheet.
• C) It is subtracted from the Bonds Payable balance and shown with long-term liabilities on the balance sheet.
• D) It is subtracted from the Bonds Payable balance and shown with the current liabilities on the balance sheet.

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Definitions:

Fair Value

The estimated market value of an asset or liability in an arm's length transaction between informed and willing parties.

Investment Income

Income received from the assets invested in, such as dividends, interest, or rental income.

Common Stock

Shares of ownership in a corporation that grant holders voting rights and a share of the company’s profits through dividends.

Long-Term Investment

Investments a company intends to hold for more than one year, typically including stocks, bonds, or real estate.