A discount on bonds payable:
A) Occurs when a corporation issues bonds with a contract rate less than the market rate.
B) Only occurs when unsecured bonds are issued.
C) Is recorded as a contra equity account.
D) Occurs when a corporation issues bonds with a contract rate higher than the market rate.
E) Never happens in the real world.

Question

Quizplus · Accepted Answer

A discount on bonds payable occurs when the bonds are issued with a contract rate (coupon rate) that is less than the market rate, leading investors to pay less than the face value for the bonds.

A Discount on Bonds Payable