Question

Unamortized bond discount should be reported on the balance sheet of the issuer as a (3 points) A. None of the above B. Direct deduction from the face amount of the debt. C. Deferred charge. D. Direct deduction from the present value of the debt.

Answer 1

ANSWER:

B. A direct deduction from the face amount of the debt.

EXPLANATION:

To define An Unamortised bond you should know the meaning of these terms,

A) A PAR of a bond: this is referred to as the bond's value at maturity. That is the value of a bond when it matures.

B) A bond DISCOUNT refers to the the bond's excess of par value over its selling price. That is the difference between the par value and the amount the bond is sold.

And now an AMORTIZED BOND DISCOUNT is the balance of a bond discount that remains to be amortized by the issuing firm over the bond's life until it matures.

It is the difference between a Bond's value at maturity and the proceeds from the sale of the bond by the issuing company, less the portion that has already been amortized (written off in gradual increments) on the profit and loss statement.

It is usually reported on the balance sheet of the issuer as the Direct deduction from the face amount of the debt.