A Pure Discount Security Is an Interest-Bearing Asset That Pays

question 49

Multiple Choice

A pure discount security is an interest-bearing asset that pays:

• A)interest on a semi-annual basis.
• B)interest on an annual basis.
• C)a single payment at maturity.
• D)no interest.
• E)a variable-rate interest.

---

Definitions:

Depreciation Expense

Methodically spreading out the expense of a physical asset across its period of usability.

Capital Lease

A lease classified as a purchase by the lessee, whereby the lessee records the leased asset as an owned asset on the balance sheet.

Bargain Purchase Option

A lease agreement provision allowing the lessee to purchase the leased asset at a price significantly lower than its expected fair market value at the end of the lease term.

Long-term Liability

A long-term liability is a financial obligation of a company that is due beyond one year, such as bonds payable, long-term leases, and pension obligations.