Answer:It should be an addition to the face amount of the bonds in the liability section. This is because a premium on a bond investment made is usually recorded in the account for investment and amortized over it’s known useful life
Answer:
an addition to the face amount of the bonds in the liability section
Explanation:
When a bond is sold at a premium, it means that its market price was higher than its face value, e.g. face value = $100, market value = $105 results in a $5 premium.
the journal entry for this example should be:
Dr Cash 105
Cr Bonds payable 100
Cr Premium on bonds payable 5
Both bonds payable and premium on bonds payable are liability accounts.
