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1. If bonds are issued at 101.25, this means that C
| | a. | a $1,000 bond sold for $101.25. |
| | b. | the bonds sold at a discount. |
| | c. | a $1,000 bond sold for $1,012.50. |
| | d. | the bond rate of interest is 10.13% of the market rate of interest. |
2. The Discount on Bonds Payable account is shown on the balance sheet as
D
| | a. | an asset. | | | b. | an expense. | | | c. | a long-term liability. | | | d. | a contra long-term liability. | |
3. When will bonds sell at a discount? B
| | a. | The credit standing of the issuing company is not as good as other companies in a similar line of business. |
| | b. | The face rate of interest is less than the market rate of interest at the time of issue. |
| | c. | The face rate of interest is more than the market rate of interest at the time of issue. |
| | d. | The issuing company will be able to retire the bonds at less than face at maturity. |
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