A bond is a formal unconditional promise, made under seal, to pay a specified sum of

money at a determinable future date, and to make periodic interest payments at a

stated rate until the principal sum is paid. In simple language, a bond is a contract of
debt whereby one party called the borrower or issuer borrows funds from another party
called the investor or bondholder. A bond indenture or deed of trust is the document
which shows in detail the terms of the bond and the rights and duties of the borrower
and other parties to the contract.

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:

a. At amortized cost, using the effective interest method

b. At fair value through profit or loss

What is the interest rate written on the face of the bond? = Coupon rate, nominal rate
or stated rate

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

Which of the following is true of a premium on bonds payable? = The premium on

bonds payable decreases when amortization entries are made until the balance
reaches zero at maturity date.

The amortization of discount on bonds payable = increases the carrying amount of

bonds payable.

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