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On a classified statement of financial position, bonds payable with an unamortized discount are presented in what way within non-current liabilities?
AThe discount is added to the face amount to show a higher carrying amount
BThe face amount is shown, the discount deducted, and the carrying amount presented
COnly the discount balance is reported, omitting the face amount
DThe bonds are reported within stockholders' equity instead
Answer & Solution
Correct answer: B. The face amount is shown, the discount deducted, and the carrying amount presented
1. The bonds payable face amount is listed first.
2. The unamortized discount is shown as a deduction from that face amount.
3. The net result, the carrying amount, is presented in the far-right column.
4. A discount reduces the carrying amount, so option A (adding it) is wrong; the discount is a contra-liability.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Classified Balance Sheet", p.238_