Bonds Payable Multiple Choice Reviewer
Bonds Payable Multiple Choice Reviewer
Bonds Payable Multiple Choice Reviewer
PFRS 9, paragraph 5.1.1, provides that bonds payable not designated at fair value
through profit or loss shall be measured initially at fair value minus transaction costs that
are directly attributable to the issue of the bonds' payable. The fair value of the bonds
payable is equal to the present value of the future cash payments to settle the bond
liability. Bond issue costs shall be deducted from the fair value or issue price of the
bonds payable in measuring initially the bonds payable. However, if the bonds are
designated and accounted for "at fair value through profit or loss", the bond issue costs
are treated as expense immediately. Actually, the fair value of the bonds payable is the
same as the issue price or net proceeds from the issue of the bonds, excluding accrued
interest.
PFRS 9, paragraph 5.3.1, provides that after initial recognition, bonds payable shall be
measured either:
When interest expense for the current year is more than interest paid, the bonds were
issued at = A discount
If bonds are issued at a premium, this indicates that = The nominal rate of interest
exceeds the yield rate
A 20-year bond was issued at a premium with a call provision to retire the bond. When
the bond issuer exercised the call provision on an interest date, the call price exceeded
the carrying amount of the bond. The amount of bond liability removed from the
accounts should have equaled the = Face amount plus unamortized premium