Miller Corp. purchased $1,000,000 of bonds at 105. The bonds pay interest at the rate of 10%. Miller intends to hold these bonds to maturity. Which of the following statements is false?
A) Since the bonds were issued at a premium, the cash interest will be greater than interest revenue.
B) Since the bonds were issued at a premium, the book value of the bond investment will decrease.
C) The bond investment must be accounted for using the held-to-maturity classiﬁcation.
D) The company would recognize unrealized gains or losses on the bonds under the fair value approach within the income statement.

Question

Quizplus · Accepted Answer

Since Miller intends to hold the bonds to maturity, they are classified as held-to-maturity and are not subject to fair value adjustments in the income statement. Unrealized gains or losses are not recognized for held-to-maturity securities.