CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

On May 1, 2009 Bluefish Co. bought 100 bonds (face value $1,000 and stated interest 10%) of Hawkeye Inc., interest payable semi-annually on July 1, and January 1. The bond price was 920 excluding accrued interest. Due to short-term nature of the investment Bluefish put this in marketable debt securities section of its current assets. At the end of 2009 the interest revenue from this investment on income statement should be:
A. No interest revenue, since marketable securities are short-term in nature and only the difference between acquisition price and disposition price is calculated as gain or loss.
B. $10,000 since it received $5,000 on July as bond interest and another $5,000 would be due tomorrow (Jan. 1, 2010)
C. $6,667
Explanation: 100 x $1,000 x 0.1 x 8/12 = $6,667.

User Contributed Comments 3

User Comment
geet (100*1000*.1/6)+ (100*1000*.1*5/6)
mimi01 (100*1000*.1*5/6)-(100*1000*.1*1/6)
Hishy Always watch for the payment date
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