In 1960,Johnson Company Purchased a Building for $100,000

question 148

Multiple Choice

In 1960,Johnson Company purchased a building for $100,000.In 2013,a real estate professional says the building has a fair value of $1,000,000.In 2013,a similar building down the street recently sold for $900,000.What value is reported for the building on the balance sheet at December 31,2013?

• A)$100,000
• B)$550,000
• C)$900,000
• D)$1,000,000

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Definitions:

Debentures

A type of debt instrument not secured by physical assets or collateral but based on the creditworthiness and reputation of the issuer.

Mortgage Bonds

Bonds secured by the pledge of specific assets, usually real estate properties, as collateral for the debt.

Yield to Maturity

The total return expected on a bond if held until its maturity date.

Reinvestment Rate Risk

The risk that future cash flows from an investment will have to be reinvested at a potentially lower interest rate, impacting the investment's overall returns.