Freddy Purchased a Certificate of Deposit for $20,000 on January

question 80

Multiple Choice

Freddy purchased a certificate of deposit for $20,000 on January 1,2011.The certificate's maturity value in two years (December 31,2012) is $22,050,yielding 5% before-tax interest.

• A) Freddy must recognize $2,050 gross income in 2012.
• B) Freddy must recognize $2,050 gross income in 2011.
• C) Freddy must recognize $1,000 (.05 ´ $20,000) gross income in 2011.
• D) Freddy must recognize $1,025 ($2,050/2) gross income in 2011 and 2012.
• E) None of the above.

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