Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following debt instruments trades with accrued interest?

Bankers' acceptances

Commercial paper

Treasury bills

Corporate bonds

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Verified step by step guidance

Understand the concept of accrued interest: Accrued interest refers to the interest that has accumulated on a debt instrument since the last interest payment date. Debt instruments that pay periodic interest typically trade with accrued interest.

Analyze the characteristics of each option: Bankers' acceptances, commercial paper, and treasury bills are short-term debt instruments that typically do not pay periodic interest. Instead, they are issued at a discount and redeemed at face value, meaning they do not trade with accrued interest.

Focus on corporate bonds: Corporate bonds are long-term debt instruments that usually pay periodic interest (coupon payments) to bondholders. When these bonds are traded between interest payment dates, the buyer compensates the seller for the accrued interest since the last payment.

Relate accrued interest to trading: When corporate bonds are traded, the price includes the accrued interest, which is calculated based on the number of days since the last coupon payment and the bond's annual coupon rate.

Conclude why corporate bonds trade with accrued interest: Corporate bonds are the correct answer because they involve periodic interest payments, and accrued interest is added to the bond's price during trading to ensure fair compensation for the seller.