Which of the following choices concerning the recognition of interest income for corporate bondare correct?

a. if bonds are purchased at a premium in the secondary market, the premium can be amortized or added to the basis of the bond.
b. if bonds were issued at a discount, special original issue discount rules apply
c. the actual interest payments received are included in gross income.

The correct answers are letters "A", "B", and "C".

Explanation:

Corporate bonds are securities that firm issues to be sold to investors to raise funds that will be using to keep the company up and running. Investors profit from the interest rate dealt in the bond agreement or sometimes they obtain physical assets of the organization as collateral. If in the secondary market bonds are issued at a premium, the premium can be amortized or applied to the bond base but if the bonds were issued at a discount, discount bond rules take into place. The interest payment received thanks to the bonds are recorded in the gross income.

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