[pdye]

Payne Co. prepares its Statement of Cash Flows using the indirect method. Payne’s unamortized bond discount account decreased by $25,000 during the year.
How should Payne report the change in the unamortized bond discount in its Statement of Cash Flows?
-As a financing cash inflow
-As a financing cash outflow
-As an addition to net income in the operating activities section
-As a subtraction from net income in the operating activities section

I’m trying to get a better handle on this question. I know there is amortization for discount of bonds payable and bond investments. At first I had a hard time wrapping my head around this and the assumption that this was bonds payable. Does the statement “Payne’s unamortized bond discount” confirm this is related to bonds that Payne issued?

Thanks.

[Asja]

I have a really hard time wrapping my head around bond receivable vs bond payable and the related premium/discount and how it shows up on the income statement…I wish I could help you but I get paralyzed trying to figure it out…Bumping post.

Would premium/discount amortization for a receivable bond investment ever show up on the income statement? Or is it just reflected in the interest revenue account?

[Author]

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