Chang Corp

question 24

Multiple Choice

Chang Corp.purchased $1,000,000 of bonds at par value on April 1,2019.The bonds pay interest at the rate of 10%.Chang intends and has the ability to hold these bonds to maturity.Which of the following statements is false?

• A)Since the bonds were issued at par value,the cash interest will be the same as interest revenue.
• B)The bonds will earn $75,000 of interest by December 31,2019.
• C)The bond investment must be accounted for using the fair value method.
• D)Since the bonds were classified as held-to-maturity,the company would not recognize unrealized gains or losses on the bonds during the period held by Chang.

---

Definitions:

Incremental Revenue

Additional income generated from a new action or decision, beyond what would have been achieved without it.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Real-options Analysis

A financial modeling technique for valuing flexibility and decision-making in investment under uncertainty.

Incremental Analysis

The examination of the additional costs and benefits of certain decisions, focusing on the changes that would occur from choosing one alternative over another.