Which of the Following Statements Correctly Describes the Accounting for Bonds

question 16

Multiple Choice

Which of the following statements correctly describes the accounting for bonds that were issued at a discount?

• A)The market rate of interest is less than the coupon interest rate.
• B)The interest expense over the life of the bonds will be less than the total cash interest payments.
• C)The present value of the bonds' future cash flows is greater than the bonds' maturity value.
• D)The book value of the bond liability increases when interest payments are made on the due dates.

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Definitions:

Future

A standardized financial contract obligating the buyer to purchase, and the seller to sell, a specific asset at a predetermined future date and price.

Transactions Exposure

The risk that a company's financial performance or position may be affected by fluctuations in exchange rates impacting transactions in foreign currencies.

Financial Risk

A potential for financial loss inherent in an investment or business operation.

Uncertain Prices

Prices that are not fixed or determined, often fluctuating due to various market conditions or uncertainties.