Question

Why are "Discount on Bonds Payable" and the "Amortization Expense on the Discount for Bonds Payable"...

Why are "Discount on Bonds Payable" and the "Amortization Expense on the Discount for Bonds Payable" placed in the Intangible Assets on the Balance Sheet?

Homework Answers

Answer #1

Discount on Bonds Payable are contra liability account as it subtracts from Bonds payable but instead subtracting under liabilities it should shown as intangible assets however it is treated as assets by the bond issuer over the life of the bond until the bond's maturity date
Amortization Expense on the Discount for Bonds Payable" are treated as Intangible Assets on the Balance Sheet because it is used for tax purposes as the amortized bond discount is treated as part of a company's interest expense on its income statement and interest expenses are tax deductible and it is the accounting method of treating the bonds by reducing the cost gradually and systematically over the period of life.

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