Chapter 14, Problem 13RQ

To determine

When the bonds are issued at premium, then the premium amount shall be transferred to account named Premium on issue of Bonds payable. This account will have a credit balance and this balance will be amortized over the life of the bonds on the basis of method used and will get reduced to Nil balance at the end of bond life or at maturity. This unamortized amount shall be added in the nominal value of bonds payable to compute the amount of bonds payable to be shown in the Balance Sheet.

The Nature of account of premium on issue of bonds payable and computation of balance of discount on issue of bonds need to be determined.