Chang Corp

question 110

Multiple Choice

Chang Corp.purchased $1,000,000 of bonds at par value on April 1,2010.The bonds pay interest at the rate of 10%.Chang intends to hold these bonds to maturity.Which of the following statements is false?

• A)Since the bonds were issued at par value, the cash interest will be the same as interest revenue.
• B)The bonds will earn $75,000 of interest by December 31, 2010.
• C)The bond investment must be accounted for using the fair value approach.
• D)Since they were classified as held-to-maturity, the company would recognize no unrealized gains or losses on the bonds over their lifetime.

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Definitions:

Consumption Function

A mathematical expression in economics showing how total consumption is related to the gross national income.

Consumption Function

A financial equation that illustrates the correlation between overall consumption and the gross national income.

Aggregate Income

The total income earned by all individuals or entities in an economy, including wages, profits, rents, and investment income, before taxes.

Aggregate Income

The total amount of income generated by all individuals and entities within an economy over a specific time period.