Question

Markel Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has not changed. Markel elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year

Answer 1

Answer:

Interest Expense and no gain or no loss.

Explanation:

Gain or Loss is any difference between the outstanding debt and the amount paid to retire that debt.

Interest expense is a non-operating expense shown on the income statement. It represents interest payable on any borrowings – bonds, loans, convertible debt or lines of credit.

Interest expense relates to the cost of borrowing money. It is the price that a lender charges a borrower for the use of the lender's money. On the income statement, interest expense can represent the cost of borrowing money from banks, bond investors, and other sources.

This is what the company will report in their income statement.

Interest income and interest expense are reported separately, or together and under either "interest income - net" (if there is a surplus in interest income) or "interest expense - net" (if there is a surplus in interest expense).