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Which of the following is not generally correct about recording a sale of a debt security before maturity date?
a. Accrued interest will be received by the seller even though it is not an interest payment date.
b. An entry must be made to amortize a discount to the date of sale.
c. The entry to amortize a premium to the date of sale includes a credit to the Premium on Debt Investments.
d. A gain or loss on the sale is reported as an other revenue or expense.

Respuesta :

Answer: The entry to amortize a premium to the date of sale includes a credit to the Premium on Debt Investments.

Explanation:

Debt security is simply issued by either the government or a corporation and it's an investment in debt instrument.

The statement that is not generally correct about recording a sale of a debt security before maturity date is that the entry to amortize a premium to the date of sale includes a credit to the premium on debt Investments. This isn't true as the entry to amortize a premium to the date of sale does not include a credit to the premium on debt Investments

Debt securities or bonds are financial instruments. The most common types of debt instruments are municipal bonds and corporate bonds. The debt securities can be the amount taken in the form of a loan that is to be paid mandatorily after the maturity of the time period.

The entry that is incorrect for recording a sale of a debt security before the maturity date is:

Option c. The entry to amortize a premium to the date of sale includes credit to the Premium on Debt Investments.

Reason:

The entry will be incorrect for the sale of debt security because the amortization premium at the date of sale does not include any credit amount to the premium over the debt instruments.

All the other options will record a sale of debt before its maturity period.

To know more about debt securities, refer to the link:

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