Question

Crawford Inc. has bonds outstanding during a year in which the general (risk-free) 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?Interest expense and an unrealized gain.

Interest expense and a realized gain.

No interest expense and an unrealized gain.

Interest expense and no gain or loss.

Interest expense only in the income statement and an unrealized holding gain in other comprehensive
income.

Answer 1

Answer:

Interest expense and a realized gain.

Explanation:

Given:

Crawford Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has risen. Crawford elected the fair value option for the bonds upon issuance.

Solution:

The company will report Interest expense and a realized gain for the bonds in its income statement for the year.