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.

Question

Quizplus · Accepted Answer

A discount on bonds payable occurs when a company issues bonds with a contract rate less than the market rate. This means that the bonds are issued at a discount, or below face value, and the discount is amortized over the life of the bonds, resulting in a higher total interest expense.

A Discount on Bonds Payable