At the beginning of 2016,Mary purchased a 3-year certificate of deposit (CD)for $8,760.The maturity value of the certificate was $10,000 and it was to yield 4.5%.She also purchased a Series EE bond for $6,400 with a maturity value in 10 years of $10,000.Mary must recognize $1,240 of income from the certificate of deposit in 2016,and $3,600 from the Series EE bonds in 2025.

Question

Quizplus · Accepted Answer

The income from the certificate of deposit should be recognized over the 3-year period, not entirely in 2016. The Series EE bond interest is typically recognized at maturity or when the bond is cashed, not annually.

At the Beginning of 2016,Mary Purchased a 3-Year Certificate of Deposit