Which of the following statements does not correctly describe the accounting for bonds that were issued at their face (maturity) value?
A) The market rate of interest equals the stated interest rate.
B) The interest expense over the life of the bonds will equal the cash interest payments.
C)The present value of the bonds' future cash flows equals the bonds' maturity value.
D)The book value of the bond liability decreases when interest payments are made on the due dates.

Question

Quizplus · Accepted Answer

The book value of the bond liability decreases when interest payments are made on the due dates is not correct as the book value remains the same until the bond matures. Interest payments only decrease the balance of the Discount on Bonds Payable account associated with the bond liability.

Which of the Following Statements Does Not Correctly Describe the Accounting