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:

Interest Expense

The cost associated with an organization's debt over a given period of time.

Accounts Receivable

This represents the funds owed to a business by customers for goods or services delivered or used but not yet paid for.

Net Operating Income

Represents the profitability from normal business operations, excluding income and expenses from unusual or non-recurring items.

Credit Card Company

A Credit Card Company is a financial institution that issues credit cards to consumers, extending a line of credit for purchases with the agreement that the consumer will pay back the borrowed amount, plus any applicable interest.