If Bonds with a Face Value of $20,000 Are Redeemed

question 103

Multiple Choice

If bonds with a face value of $20,000 are redeemed before maturity when the amortized cost of the bonds is $18,000, the entry to record the redemption will include a debit to

• A) Bonds Payable for $20,000.
• B) Bonds Payable for $18,000.
• C) Interest Payable for $2,000.
• D) Bonds Payable equal to the market price of the bonds on the date of conversion.

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Definitions:

Management

The process of directing and controlling a group of people or an organization in order to achieve a goal.

Secondary Market

A market where investors buy and sell securities they already own, typically through a brokerage.

Primary Market

The market where new securities are issued and bought directly from the issuing company, facilitating capital raising.

Auction Market

A marketplace where buyers and sellers enter bids and offers simultaneously; prices are determined through direct interaction of supply and demand.