Crystal Co

question 31

Multiple Choice

Crystal Co.purchased all of the common stock of Sill Corp.on January 1 of the current year.Five years prior to the acquisition, Sill Corp.had issued 30-year bonds bearing an interest rate of 8%.At the time of the acquisition, the prevailing interest rate for similar bonds was 5%.These bonds should be included in the consolidated balance sheet at​

• A)​face value.
• B)​at a value higher than Sill's recorded value due to the change in interest rates.
• C)​at a value lower than Sill's recorded value due to the change in interest rates.
• D)​at Sill's recorded value.

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Definitions:

Inelastic

An inelastic good or service has a demand that does not change significantly when its price goes up or down.

Insensitive to Price

A characteristic of demand wherein the quantity demanded by consumers changes very little with a change in the product's price.

Unit Elastic

A situation in economics where the percentage change in quantity demanded is equal to the percentage change in price, resulting in no change in total revenue.

Total Revenue

The overall financial returns a corporation secures by selling products and providing services across a certain interval.