A held-to-maturity debt investment with a carrying value of $5,000,000 is determined to be impaired due to concerns about the investee's abilityto pay principal and interest. The investment's current market value is $4,000,000.The bonds were originally sold at par. Which statement is true?Select one:O a. A $1,000,000 loss is reported in OCI.Ob. The investment account is directly reduced by $1,000,000.c. No loss is reported.d. A $1,000,000 loss is reported in income.

Held-to-maturity (HTM) debt securities are those fixed-income instruments that the companies hold…

Answered: A held-to-maturity debt investment with…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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If a company issues $15,000,00 worth of bonds with a face interest rate equal to the market interest rate, the bonds will sell at an amount Group of answer choices A)less than $15,000,000. b)equal to $15,000,000. C)greater than $15,000,000. D)that can’t be determined from the information provided in the problem.
Answer these two fast
1. If bonds are sold at a discount and the straight-line method of amortization is used, interest expense in earlier years will: (A) Exceed what is would have been had the effective interest rate method of amortization been used. (B) Be less than what it would have been had the effective interest rate method of amortization been used. (C) Be the same as it would have been had the effective interest rate method of amortization been used. (D) None of the above.
27. If a long-term bonds becomes callable due to the violation of a debt covenant Group of answer choices a. The debt may continue to be classified as long term if the entity believes the covenant can be renegotiated. b. The debt must be reclassified as current. c. Cash must be reserved to pay the debt. d. Retained earnings must be restricted in the amount of the debt.
Zero coupon bonds: O a. create annual taxable income to individual bondholders. O b. create a tax deduction for the issuer only at maturity. O care issued only by the U.S. Treasury. O d. are issued at a premium. O e. are valued using simple interest.
Did Delta have to disclose the market value of bonds in financial statements? a. No b. Yes, in footnotes c. Yes, in footnotes and on the face balance sheet d. Yes, but only if they can compute a market value.
Use of the effective-interest method to amortize bond premiums and discounts results in O a smaller amount of interest income over the life of the bond issue than would result from the use of the straight-line method. a varying amount being recorded as interest income from period to period. O a variable rate of return on the book value of the investment. O a greater amount of interest income over the life of the bond issue than would result from the use of the straight-line method.

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