On January 1, Bucket Company Purchased as an Investment a $1,000

question 111

Multiple Choice

On January 1, Bucket Company purchased as an investment a $1,000, 7% bond for $980. Bucket plans to hold the bond for two years. The bond pays interest on January 1 and July 1. The entry to record the interest accrual on December 31 would include a:

• A) debit to Interest Receivable for $35.
• B) debit to Long-Term Investment in Bonds for $35.
• C) debit to Interest Receivable for $70.
• D) debit to Long-Term Investment in Bonds for $70.

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Definitions:

ROA

Return on Assets, a profitability ratio that measures how efficiently a company can manage its assets to produce profit during a period.

Effective Utilization

Effective utilization refers to how efficiently resources, such as labor and equipment, are used to produce goods or services.

EBIT

Earnings before interest and taxes; a measure of a company's profitability that excludes interest and income tax expenses.

Quick Ratios

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets.