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

11. Long Term Liabilities

Discount on Bonds

Financial Accounting

11. Long Term Liabilities

Discount on Bonds

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

If bonds are issued at a discount, it means that the:

issue price is less than the face value of the bonds

issue price is greater than the face value of the bonds

bonds will not pay any interest to investors

stated interest rate is higher than the market interest rate

Previous problemNext problem

Verified step by step guidance

Understand the concept of bonds issued at a discount: Bonds are issued at a discount when the issue price (the price investors pay for the bond) is less than the face value (the amount the issuer promises to pay at maturity). This typically happens when the stated interest rate on the bond is lower than the prevailing market interest rate.

Analyze the relationship between stated interest rate and market interest rate: When the stated interest rate is lower than the market interest rate, investors demand a lower price for the bond to compensate for the lower interest payments they will receive.

Evaluate the options provided: The correct answer must align with the definition of bonds issued at a discount, which is that the issue price is less than the face value of the bonds.

Eliminate incorrect options: The option stating that the issue price is greater than the face value is incorrect because it describes bonds issued at a premium. The option stating that bonds will not pay any interest is incorrect because bonds issued at a discount still pay interest, just at a lower rate. The option stating that the stated interest rate is higher than the market interest rate is incorrect because this scenario would lead to bonds being issued at a premium.

Select the correct answer: Based on the analysis, the correct answer is 'issue price is less than the face value of the bonds,' as this matches the definition of bonds issued at a discount.