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

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following best describes the nature of a bond payable and its related cost allocation concept?

Bond payable is a long-term liability, and its cost is allocated through amortization of any premium or discount over the bond's life.

Bond payable is an intangible asset, and its cost is allocated through depletion.

Bond payable is a long-term asset, and its cost is allocated through depreciation.

Bond payable is a current liability, and its cost is allocated through depreciation.

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Verified step by step guidance

Step 1: Understand the nature of a bond payable. A bond payable is a long-term liability, meaning it represents an obligation that the company must repay over a period longer than one year.

Step 2: Recognize the cost allocation concept related to bonds. When a bond is issued at a premium (above face value) or discount (below face value), the difference between the issue price and the face value must be systematically allocated over the life of the bond.

Step 3: Learn the method of cost allocation for bonds. The allocation is done through amortization, which spreads the premium or discount over the bond's life using methods such as the straight-line method or the effective interest method.

Step 4: Eliminate incorrect options. Bonds are not intangible assets, so depletion does not apply. Bonds are not long-term assets, so depreciation does not apply. Bonds are typically long-term liabilities, not current liabilities, unless they are nearing maturity.

Step 5: Conclude that the correct description is: 'Bond payable is a long-term liability, and its cost is allocated through amortization of any premium or discount over the bond's life.'