Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Notes Payable

Financial Accounting

9. Current Liabilities

Notes Payable

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Multiple Choice

Which of the following best describes the balance in the unamortized discount on bonds payable account?

It is an asset account that increases the carrying amount of bonds payable.

It is a contra-liability account that reduces the carrying amount of bonds payable on the balance sheet.

It is a liability account that increases the carrying amount of bonds payable.

It is an equity account that affects retained earnings.

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Verified step by step guidance

Understand the concept of 'unamortized discount on bonds payable': This represents the portion of the bond discount that has not yet been amortized to expense. A bond discount occurs when bonds are issued for less than their face value.

Recognize the classification of the account: The unamortized discount on bonds payable is classified as a contra-liability account. Contra accounts are used to reduce the balance of a related account—in this case, bonds payable.

Understand the impact on the carrying amount: The unamortized discount reduces the carrying amount of bonds payable on the balance sheet. The carrying amount is calculated as the face value of the bonds minus the unamortized discount.

Clarify why it is not an asset, liability, or equity account: The unamortized discount does not increase the carrying amount of bonds payable (as a liability account would), nor does it affect retained earnings (as an equity account would). It specifically reduces the liability balance.

Relate this to financial statement presentation: On the balance sheet, the bonds payable account is presented net of the unamortized discount, showing the reduced carrying amount of the liability.