Trent Corp

question 78

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 correct?

• A) Since the bonds were purchased at a discount, the cash interest will be more 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 as available-for-sale.
• D)The company will recognize unrealized gains or losses on the bonds.