Trent Corp

question 17

Multiple Choice

Trent Corp.purchased $1,000,000 of bonds at 96 when the market yield was 8%.The bonds pay interest at the rate of 6%.Trent intends to hold these bonds to maturity and will not need to sell the bonds before that date. Which of the following statements is correct?

• A)Since the bonds were purchased at a discount,the cash interest will be more than interest revenue.
• B)Since the bonds were purchased at a discount,the book value of the bond investment will increase toward its maturity value.
• C)The bond investment will be classified as available-for-sale.
• D)The company will recognize unrealized gains or losses on the bonds at each balance sheet date when the bonds are adjusted to fair value.

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A state of being bewildered or unclear in one's mind about something.

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A strong feeling of displeasure or hostility.

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The process of acquiring knowledge or behavior through observing and interacting with others.

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Relating to or depending on the context of a situation, meaning that it varies according to the circumstances or setting.