Question

Regarding original issue corporate bonds, which statements are TRUE?

I. Corporate original issue discount bonds must be accreted
II. Corporate original issue discount bonds may be accreted
III. Corporate original issue premium bonds must be amortized
IV. Corporate original issue premium bonds may be amortized
A. I and III
B. I and IV
C. II and III
D. II and IV

Answer 1

Answer: B. I and IV

Step-by-step explanation:

A corporate bond is a bond that is being issued by a corporation so as to to raise finance or expand its business.

Regarding original issue corporate bonds, the true statements are that:

• Corporate original issue discount bonds must be accreted.

• Corporate original issue premium bonds may be amortized.

It should be noted that the discount on the government bonds and the original issue discount corporate and have to be accreted annually. Also, the original issue premium may be amortized and the reason for this is due to its tax purposes.