Bruce Company Experienced an Accounting Event That Was Recorded in the Company's

question 89

Multiple Choice

Bruce Company experienced an accounting event that was recorded in the company's general journal as indicated below:

Which of the following shows how this event affects the elements of the financial statements?

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Yield To Call

The return a bondholder gets if the bond is held until the call date, which is before the bond's actual maturity date.

Expected Capital Gains Yield

The anticipated rate of return from an investment due to an increase in its market price.

Reinvestment Rate Risk

Occurs when a short-term debt security must be “rolled over.” If interest rates have fallen, the reinvestment of principal will be at a lower rate, with correspondingly lower interest payments and ending value.

High-Coupon Bonds

Bonds that offer a higher-than-average interest rate (coupon) compared to others in the market, reflecting potentially higher risk.