Karen Owns City of Richmond Bonds with a Face Value

question 187

Multiple Choice

Karen owns City of Richmond bonds with a face value of $10,000.She purchased the bonds on January 1,2010,for $11,000.The maturity date is December 31,2019.The annual interest rate is 8%.What is the amount of taxable interest income that Karen should report for 2010,and the adjusted basis for the bonds at the end of 2010,assuming straight-line amortization is appropriate?

• A)$0 and $11,000.
• B)$0 and $10,900.
• C)$100 and $11,000.
• D)$100 and $10,900.
• E)None of the above.

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Definitions:

Voting Rights

The rights of shareholders to vote on company matters, typically exercised at annual meetings and proportional to the number of shares held.

Dividend Paid

The portion of earnings a company distributes to its shareholders, typically expressed as a dollar amount per share.

Outstanding Shares

The total number of shares of a corporation's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost.