On January 5, 2017, Tim Purchased a Bond Paying Interest

question 106

Multiple Choice

On January 5, 2017, Tim purchased a bond paying interest at 6% for $30,000. On March 31, 2017, he gave the bond to Jane. The bond pays $1,800 interest on December 31. Tim and Jane are cash basis taxpayers. When Jane collects the interest in December 2017: ​

• A)Tim must include all of the interest in his gross income.
• B)Jane must report $1,800 gross income for 2017.
• C)Jane reports $1,350 of interest income in 2017, and Tim reports $450 of interest income in 2017.
• D)Jane reports $450 of interest income in 2017, and Tim reports $1,350 of interest income in 2017.
• E)None of these is correct.

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Definitions:

Cost Structure

The composition of fixed and variable costs that a company incurs in the process of producing goods or services.

Minimum Quantities

The smallest amount or number of items that can be produced, ordered, or maintained to ensure efficiency.

Profit Margins

A financial metric that measures the percentage of profit a company retains from its total revenue after subtracting the cost of goods sold and other expenses.

Maximum Amounts

Maximum Amounts refer to the highest possible quantities or levels that are permissible or achievable under certain conditions.