Trent Corp

question 36

Multiple Choice

Trent Corp. purchased $1,000,000 of bonds at 96 when the market yield was 8%. The bonds pay interest at the rate of 6%. Miller intends to hold these bonds to maturity and will not need to sell the bonds before that date. Which of the following statements is not correct?

• A) Since the bonds were purchased at a discount, the cash interest will be less than interest revenue.
• B) Since the bonds were purchased at a discount, the book value of the bond investment will increase toward its maturity value.
• C)The bond investment will be classified and accounted for as amortized debt.
• D)The company would not recognize unrealized gains or losses on the bonds.

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Definitions:

Minor

An individual under the age of legal competence, typically under 18 years, with certain restrictions on their legal rights and responsibilities.

Doctrine of Liability

Legal principles that determine the circumstances under which an individual or entity can be held legally responsible for an action or inaction.

Tort Connected

Related to civil wrongs that cause someone else to suffer loss or harm, resulting in legal liability for the person who commits the tortious act.

Uniform Commercial Code

The Uniform Commercial Code (UCC) is a comprehensive set of laws governing commercial transactions in the United States, aiming to make business laws more consistent across states.