Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are True except:

Question

Quizplus · Accepted Answer

The semiannual interest payment amount will be 8% of the bond's par value, which is $300,000, making the semiannual payment $12,000 (300,000 x 0.08 / 2). Therefore, option D is false as the correct interest payment amount is $12,000 and not $24,000. All other options are true, as the debt securities should be recorded at cost, will have a maturity value equal to the purchase price, and interest revenue should be credited when payments are received.

Seamark Buys $300,000 of Eider's 8% Five-Year Bonds Payable at Par