On July 1, 2016, Overlin Corp

question 36

Multiple Choice

On July 1, 2016, Overlin Corp.purchased $100,000 of 8% bonds at face value.Interest is paid annually on June 30.If the accounting year for Overlin ends at December 31, 2016, what will be reported with respect to the bonds on that date?

• A) The carrying value of the bonds will be $108,000.
• B) The cash received in interest will be $8,000.
• C) Interest income in the amount of $4,000 will be accrued.
• D) A loss on the bonds will be reported in the Other Income and Expense section of the 2016 income statement until the entire amount of interest is paid on June 30, 2017.

---

Definitions:

Borrowing

The act of receiving something from someone with the intention of returning it or its equivalent.

Increasing Assets

Refers to the growth or escalation in the value of assets owned by a business or individual.

Accrued Expenses

Costs that have been incurred but not yet paid for, recognized under the accrual basis of accounting.

Accounts Receivable

Money owed to a company by its clients or customers for goods or services delivered but not yet paid for.