When recording bond issuance costs for fees paid to underwriters:

A) The fee is recorded in a bond issuance costs account regardless of whether the bonds were issued at a discount or at a premium.
B) The fee is recorded as a reduction in the bond discount account if the bonds were issued at a discount.
C) The fee is recorded as a reduction in the bond premium account if the bonds were issued at a premium.
D) The fee is recorded as a bond issuance expense regardless of whether the bonds were issued at a discount or at a premium.

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Madison Zimmerman · Accepted Answer

Final Answer : C, Explanation :  When bonds are issued at a premium, the issuer receives more cash than the face amount of the bond. The premium is then transferred to a liability account called Premium on Bonds Payable. When recording bond issuance costs, they are considered a reduction of the premium account because they decrease the net amount of cash received from the bond issuance.

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