Start learning →

ACCA Knowledge Level Bonds Payable — practice questions

Explore 6 free Bonds Payable questions in ACCA Knowledge Level Financial Accounting. Open each question or exercise to read its content, reference answers and available explanation.

Practise Bonds Payable with Quill →

Bonds Payable questions and exercises with answers

Showing questions 1–6 of 6.

A corporation's bond carries a 12% contract rate while the market rate is 11%. How will the bond be issued?Read the answer and worked solution →A corporation's bond has an 11% contract rate while the market rate is 12%. How will the bond be issued?Read the answer and worked solution →What is the semi-annual interest payment on $100,000 of 12% bonds?Read the answer and worked solution →Bonds with a $3,679 discount and a five-year term are amortized using the straight-line method. What is the annual discount amortization (rounded)?Read the answer and worked solution →A bond has a Bonds Payable credit balance of $100,000 and a Discount on Bonds Payable debit balance of $2,943. What is the carrying amount of the bond?Read the answer and worked solution →A bond has a Bonds Payable credit balance of $100,000 and a Premium on Bonds Payable credit balance of $3,015. What is the carrying amount of the bond?Read the answer and worked solution →

Worked practice questions

A corporation's bond carries a 12% contract rate while the market rate is 11%. How will the bond be issued?

  1. At a discount, below face amount
  2. At a premium, above face amount
  3. At face amount
  4. It cannot be issued at all
Show answer and solution

Correct answer: B. At a premium, above face amount

1. Compare contract rate (12%) with market rate (11%). 2. The contract rate is greater than the market rate, so this bond pays more interest than comparable bonds. 3. Investors will pay extra up front for the richer interest stream, so the bond sells at a premium (above face amount). 4. A discount (option A) occurs only when the contract rate is below market. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Bonds", p.224_

Open this question →

A corporation's bond has an 11% contract rate while the market rate is 12%. How will the bond be issued?

  1. At a premium, above face amount
  2. At face amount
  3. At a discount, below face amount
  4. At a price equal to total interest paid
Show answer and solution

Correct answer: C. At a discount, below face amount

1. Compare contract rate (11%) with market rate (12%). 2. The contract rate is less than the market rate, so this bond pays less interest than comparable bonds. 3. To stay competitive the issuer must lower the price, so the bond sells at a discount (below face amount). 4. A premium (option A) occurs only when the contract rate exceeds market. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Bonds", p.224_

Open this question →

What is the semi-annual interest payment on $100,000 of 12% bonds?

  1. $12,000
  2. $6,000
  3. $3,000
  4. $1,000
Show answer and solution

Correct answer: B. $6,000

1. Multiply face amount by the contract rate for the annual interest: \$100{,}000 \times 12\% = \$12{,}000. 2. Interest is paid semi-annually, so divide by 2: \$12{,}000 \div 2 = \$6{,}000. 3. The semi-annual payment is $6,000. 4. Option A is the full annual amount, not the half-year payment. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Bonds", p.222_

Open this question →

How to practise

  1. Choose a Bonds Payable question and try to work out your answer.
  2. Open the question to check the correct answer and read its worked solution.
  3. Continue in the app for bite-sized lessons, explanations and review with Quill. You can start without creating an account.

More Financial Accounting topics

Ratio AnalysisStatement of Cash FlowsThe Mechanics of the Accounting ProcessInventory ValuationAsset, Liability and Equity AccountsFinancial StatementsAccounting EquationThe Accounting Equation