Rana Purchases a 5%, $100,000 Corporate Bond at Issuance on January

question 833

Multiple Choice

Rana purchases a 5%, $100,000 corporate bond at issuance on January 1, 2018 for $91,500. The bond matures in five years. In 2018 Rana will recognize interest income of

• A) $5,000.
• B) an amount greater than $5,000.
• C) an amount less than $5,000 (but more than $0).
• D) $0.

---

Definitions:

Total Variable Inspection Cost

The cumulative cost that varies directly with the volume of production or service, specifically related to the inspection of products or services to ensure quality.

Variable Inspection Cost

The expenses associated with quality control measures that fluctuate with the volume of production.

Machine-Hours

A measure of production output or activity based on the number of hours that machines are operated.

Average Costs

The total costs of production divided by the number of units produced, often used to assess cost efficiency.