Chang Corp

question 14

Multiple Choice

Chang Corp. purchased $1,000,000 of bonds at par value on April 1, 2016. The bonds pay interest at the rate of 10%. Chang intends to hold these bonds to maturity. Which of the following statements is false?

• A)Since the bonds were issued at par value, the cash interest will be the same as interest revenue.
• B)The bonds will earn $75,000 of interest by December 31, 2016.
• C)The bond investment must be accounted for using the fair value method.
• D)Since the bonds were classified as held-to-maturity, the company would not recognize unrealized gains or losses on the bonds during the period held by Chang.

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Definitions:

Net Income

Net income is the profit a company makes after deducting all its costs and expenses from its total revenue.

Statement of Stockholders' Equity

A financial statement that shows the changes in the value of a company's equity over a specific period.

Common Stock

Shares of ownership in a corporation, granting holders voting rights and a portion of profits in the form of dividends.

Balance Sheet

A financial statement that displays a company's assets, liabilities, and shareholders’ equity at a specific moment, showing the company's financial position.