Bellamy Company manufactures high-end bicycles. It was recently discovered that one batch of tires used to produce the bicycles were defective. As a result of the defects, three of Bellamys customers suffered substantial injuries. The customers sued Bellamy for $1,200,000. Bellamys counsel deemed that a loss was probable and the amount was a reasonable estimate of the loss. Bellamy subsequently sued the manufacturer of the tires for $5,000,000, citing that the Bellamy name had been significantly tarnished as a result of the defective tires. Bellamys counsel deemed that it was probable that Bellamy would win the lawsuit and the amount was a reasonable estimate of the settlement.

How would Bellamy record these transactions?

Bellamy would not report anything until both lawsuits are settled.

Bellamy would accrue a liability for the $1,200,000 loss and accrue a receivable for the $5,000,000 gain.

Bellamy would net the probable gain against the probable loss and would report a net gain of $3,800,000.

Bellamy would accrue a liability for the $1,200,000 loss, but would not accrue anything for the gain.

Which of the following statements is true?

When a bonds yield is higher than its face rate, the bond will sell at a premium.

When a bonds effective rate is higher than the yield, the bond will sell at a premium.

When a bonds face rate is higher than the yield, the bond will sell at a premium.

None of these answers are correct

When a bonds face rate is higher than its coupon rate, the bond will sell at a premium.