Which of the Following Statements Is True Regarding the Differences

question 45

Multiple Choice

Which of the following statements is true regarding the differences between amortized cost and fair value for debt investments?

• A)When bonds sold at a discount and are accounted for using amortized cost, interest revenue will be greater than the interest revenue recorded under fair value.
• B)When bonds sold at a premium and are accounted for using amortized cost, interest revenue will be less than the interest revenue recorded under fair value.
• C)Under the fair value approach, an unrealized gain or loss is recorded in each year whereas no unrealized gains or losses are recorded under the amortized cost method.
• D)All of these answer choices are correct.

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Definitions:

Sales

Sales involve the exchange of goods or services for payment, essentially representing the revenue generated from these transactions.

Absorption Costing

A method in accounting that captures the complete range of manufacturing costs - direct materials, direct labor, and all overhead expenses, both fixed and variable - within the cost of a product.

Variable Costing

An accounting method that includes only variable production costs in the cost of goods sold and treats fixed costs as period expenses.

Produced

Refers to goods or services that have been completed through a manufacturing or production process.