A bond with a stated interest rate of 6% and a market rate of 8% was issued at a price reflecting the market interest rate. As the bond matures:
A)the Premium on Bonds Payable decreases.
B)the Discount on Bonds Payable decreases.
C)the Premium on Bonds Payable increases.
D)the Discount on Bonds Payable increases.

Question

Quizplus · Accepted Answer

When a bond is issued at a market rate higher than its stated rate, it is issued at a discount. As the bond matures, the Discount on Bonds Payable decreases as it is amortized over the life of the bond.

A Bond with a Stated Interest Rate of 6% and a Market