Crawford Inc. has bonds outstanding during a year in which the market rate of interest has risen. Crawford elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year?
A)Interest expense and a gain.
B)Interest expense and a loss.
C)A gain and no interest expense.
D)A loss and no interest expense.

Question

Quizplus · Accepted Answer

When the market rate of interest rises, the fair value of the bonds decreases, resulting in a gain. Additionally, interest expense is recognized as usual.