Theoretically, a bond payable should be reported at the present value of the interest discounted at
A) Stated interest rate for both principal and interest
B) Effective interest rate for both principal and interest
C) Stated interest rate for principal and effective interest rate for interest
D) Effective interest rate for principal and stated interest rate for interest

Question

Quizplus · Accepted Answer

A bond payable should be reported at the present value of the interest discounted at the effective interest rate for both principal and interest. This is because effective interest rate method takes into consideration the time value of money and the amortization of any premiums or discounts over the life of the bond. Therefore, the present value of the bond should be calculated using the effective interest rate.

Theoretically, a Bond Payable Should Be Reported at the Present