A Discount on Bonds Payable

question 80

Multiple Choice

A discount on bonds payable:

• A) Occurs when a company issues bonds with a contract rate less than the market rate.
• B) Occurs when a company issues bonds with a contract rate more than the market rate.
• C) Increases the Bond Payable account.
• D) Decreases the total bond interest expense.
• E) Is not allowed in many states to protect creditors.

---

Definitions:

Miscellaneous Expense

Minor and irregular costs that do not naturally fit into other designated categories of expenses in financial accounting.

Incidentals

Minor or secondary expenses or costs that may occur in addition to the primary expenses.

Cash Burn

The rate at which a company spends its capital to finance overhead before generating positive cash flow from operations.

Cash Equivalents

Short-term, highly liquid investments with maturities of three months or less at the time of acquisition, easily convertible to known amounts of cash.