Accounting 205Test 3Name ________________________________1. True or False (circle) -Trading securitiesare securities which pay interest and which have a fixed maturity date.2. True or False (circle) -Debt Securitiesare securities that represent an ownership interest in the company and which do not have a fixed maturity date.3. Select the correct entry for thefollowing transactions for ACH Inc., which purchased a $10,000 bond issued by SD Inc., at par value on January1, X1.The bond pays 5%interest, annually,startingJanuary 1, X2each year. The purchase of the bond on January1, X1a. Debit Bond Payable $10,000, Credit Cash $10,000b. Debit Cash, $10,000, Credit Bond Payable $10,000c. Debit Bond Investment $10,000, Credit Cash $10,000d. Debit Cash, $10,000, Credit Bond Investment $10,000The accrual of interest receivableon December 31, X1a. Debit Cash $500, Credit Interest Income $500b. Debit Interest Expense, $500, Credit Cash $500c. Debit Interest Receivable $500, Credit Bond Investment $500d. Debit Interest Receivable, $500, Credit Interest Income $500The receipt of interest on January 1, X2.a. Debit Cash $500, Credit Interest Income $50