Premium on Bonds Payable has a debit balance

Accounting Aug 16, 2020

Premium on Bonds Payable

has a debit balance.

is a contra account.

is considered to be a reduction in the cost of borrowing.

is deducted from bonds payable on the balance sheet.

Expert Solution

The correct option is C "is considered to be a reduction in the cost of borrowing".

Premium on bonds payable occurs when bonds payable are issued for an amount greater than their face or maturity amount. So, Premium on Bonds Payable is considered to be a reduction in the cost of borrowing.

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