Bonds Payable

Bonds Payable

What are bonds payable?

Use the link below to read about bonds payable. You will answer questions about bonds on the slides that follow.

​Accounting Superpowers: What are bonds?

Multiple Choice

A bond is a type of loan, but in reverse because

• You don't pay or interest

• Institutions like corporations or the government are borrowing from people

• You don't earn interest

• None of the above

Multiple Choice

TRUE OR FALSE

Governments and Corporations often use bonds to borrow money

for large expenses or projects. The money they borrow comes

from normal people like you and me.

• TRUE

• FALSE

Drag and Drop

The interest rate an institution will pay out on a bond is called the​

Placeholder

.

Drag these tiles and drop them in the correct blank above

Coupon Rate

Payout

Interest

Money

Why are bonds sold at a Premium or Discount?

Amongst other factors, such as if how risky the institution wanting to borrow the money is, the primary deciding factor on whether a bond is sold at Premium, Discount or Par is the Coupon Rate on the Bond and the prevailing interest rate on already available bonds in the market.

• For example, if the Coupon Rate on the New Bond is 6% and prevailing Market Rates are approx 4% - Potential Buyers of the Bond would be willing to pay more for this bond and it is gonna sell at a Premium.

• On the flip side, if the coupon rate on the Bonds is 4% and the prevailing market rates are 6% - the bond will likely sell at a discount.  

Multiple Choice

When a company issues a bond, that company now OWES this money to the Investors (bondholders), which means they must create a LIABILITY on their books.  

The amount of this liability will now be found in company's Balance Sheet and is called a

• Accounts Receivable

• Interest

• Bonds Payable

• None of the above