Kendall Corp

question 49

Multiple Choice

Kendall Corp. purchased at par value $75,000 of Shrem Company's 8% bonds that mature in three-years. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. When the bonds mature, Kendall should prepare the following journal entry:

• A) debit Unrealized Gain-Equity, $6,000; credit Cash, $6,000.
• B) debit Cash, $75,000; credit Long-Term Investments-Trading, $75,000.
• C) debit Long-Term Investments-HTM, $75,000; credit Cash, $75,000.
• D) debit Cash, $75,000; credit Long-Term Investments-HTM, $75,000.
• E) debit Cash, $6,000; credit, Unrealized Gain-Equity, $6,000.

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Definitions:

Personal Income

The total amount of income earned by individuals, including wages, salaries, investments, and other sources before taxes.

Excise Tax

A tax applied to specific goods, services, or activities, often with the intention of reducing consumptions, such as taxes on tobacco or alcohol.

Tax Incidence

The study of who ultimately bears the economic burden of a tax, whether producers or consumers.

Inelastic Demand

A situation where the demand for a product does not significantly change with a change in its price.