Question

Demand bonds should be reported as governmental fund liabilities: A. If the government has not entered into a bona-fide take-out agreement B. If prevailing interest rates are higher than the interest rate on the bonds C. If prevailing interest rates are lower than the interest rate on the bond D. They are always reported as governmental fund liabilities

Answer 1

A. If the government has not entered into a bona-fide take-out agreement

Step-by-step explanation:

Demand bonds should be reported as governmental fund liabilities if the government has not entered into a bonafide take-out agreement. Demand bonds give the bondholder the right to demand repayment prior to maturity. Demand bonds are the long-term bonds (debt) issued with a special provision of demands. The provision provides specials rights to issuer to purchase back the bonds on demand upon a notice to the bond holder, at a price equals to principal plus accrued interest.