The U.S. government will pay Simpson Company $2,500,000 each six months, equal to 2.5% of the $100 million face amount of the treasury bonds (5% annual coupon rate, paid in two installments each year), and will repay the $100 million at the end of five years. At the time Simpson Company purchases the bonds, the market prices these bonds to yield Simpson Company 6% annually (3% each six months)
The bonds are classified as held to maturity and Simpson Company would classify this investment as a(n) _____on its _____ because it intends to hold the securities for _____.
a. current asset; balance sheet; less than one year
b. current asset; income statement; less than one year
c. noncurrent asset; balance sheet; more than one year
d. noncurrent asset; income statement; more than one year
e. current asset; statement of cash flows; less than one year
C
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