Which of the Following Statements Regarding Bonds Payable Net of a Discount

question 20

Multiple Choice

Which of the following statements regarding bonds payable net of a discount or premium is NOT true?

• A) If a company records a discount or premium with the bonds payable in a single account called Bonds Payable, Net, it can use the simplified effective interest method of amortization.
• B) When bonds payable are accounted for net of a discount, the initial amount recorded in the Bonds Payable, Net account is the issue price of the bond.
• C) When bonds are accounted for net of a premium, the balance in the Bonds Payable, Net account will increase as the bond approaches the maturity date.
• D) If a company issued bonds at their face value, the balance of Bonds Payable, Net account will always be

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Definitions:

Understated

Describes an amount reported lower than it actually is, either in financial statements or any other reporting context.

Overstated

Refers to financial statements or figures being reported as more than their actual or true value.

Cost-to-retail Ratio

A method used to estimate the value of ending inventory and cost of goods sold by comparing the cost of goods available for sale to the retail price of the goods.