Please provide a breakdown of the solutions.

On January 1, Year 1, Worthy Co. issued $1,000,000 of bonds payable. The bonds mature in five years on December 31, Year 5, and pay 9% interest once a year on December 31. The issue sold for $891,857 to yield 12%. Worthy uses the effective interest method. Assume that the bond's fair value is $940,000 at December 31, Year 3, and its book value is $949,298. If Worthy chooses the fair value option, it will report:

a. no gain or loss on its income statement.

b. again on its income statement.

c. a loss on its income statement.

On January 1, Year 1, Worthy Co. issued $1,000,000 of bonds payable. The bonds mature in five years on December 31, Year 5, and pay 9% interest once a year on December 31. The issue sold for $891,857 to yield 12%. Assume that Worthy has not chosen the fair value option, interest rates decrease during the period, and Worthy pays off the bond at maturity. Which of the following is true?

a. Worthy will report a gain on retirement in Year 5.

b. Worthy will report a loss on retirement in Year 5.

c. Worthy will report no gain or loss on retirement in Year 5.

Question

Please provide a breakdown of the solutions.

On January 1, Year 1, Worthy Co. issued $1,000,000 of bonds payable. The bonds mature in five years on December 31, Year 5, and pay 9% interest once a year on December 31. The issue sold for $891,857 to yield 12%. Worthy uses the effective interest method. Assume that the bond's fair value is $940,000 at December 31, Year 3, and its book value is $949,298. If Worthy chooses the fair value option, it will report:

a. no gain or loss on its income statement.

b. again on its income statement.

c. a loss on its income statement.

On January 1, Year 1, Worthy Co. issued $1,000,000 of bonds payable. The bonds mature in five years on December 31, Year 5, and pay 9% interest once a year on December 31. The issue sold for $891,857 to yield 12%. Assume that Worthy has not chosen the fair value option, interest rates decrease during the period, and Worthy pays off the bond at maturity. Which of the following is true?

a. Worthy will report a gain on retirement in Year 5.

b. Worthy will report a loss on retirement in Year 5.

c. Worthy will report no gain or loss on retirement in Year 5.

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Please provide a breakdown of the solutions. On January 1, Year 1, Worthy Co. issued $1,000,000 of bonds payable. The bonds mature in five years

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