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

question 20

Multiple Choice

On January 1, Bucket Company purchased as an investment a $1,000, 7% bond for $760. Bucket plans to hold the bond for two years. The bond pays interest on January 1 and July 1. The entry to record the amortization of the bond 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 $10.
• D) debit to Long-Term Investment in Bonds for $10.

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Definitions:

Earnings

The amount of profit that a company produces during a specific period, indicating the financial performance.

401k Plan

A retirement savings plan offered by many American employers, allowing employees to save and invest a piece of their paycheck before taxes.

Employer's Contribution

Money that an employer adds to an employee's benefits, such as a retirement plan or health insurance.

Allowable Contribution

The maximum amount that can legally be contributed to a particular savings account or investment vehicle, often pertaining to retirement accounts.