Table 16-5
Tiger Inc. purchased $185,000, 8%, five-year bonds to hold until maturity. The bonds were purchased on July 1, 2017, and will mature on July 1, 2020. Interest payment dates are July 1 and December 31. Market value of the bonds on July 1, 2017 was 94. Tiger uses the straight-line method to amortize any bond discount or premium.
-Refer to Table 16-5.Assume that Tiger Inc.fails to make the necessary six-month amortization entry on December 31,2017.What is the effect of that error on the December 31,2017,financial statements?
A) Interest revenue is understated by $1,110.
B) Investment in bonds is understated by $1,850.
C) Interest revenue is overstated by $1,110.
D) Investment in bonds is overstated by $1,110.
Correct Answer:
Verified
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