Freddy Purchased a Certificate of Deposit for $20,000 on July

Multiple Choice

Freddy purchased a certificate of deposit for $20,000 on July 1, 2014. The certificate's maturity value in two years (June 30, 2016) is $21,218, yielding 3% before-tax interest.

A) Freddy must recognize $1,218 gross income in 2014.
B) Freddy must recognize $1,218 gross income in 2016.
C) Freddy must recognize $600 (.03 × $20,000) gross income in 2016.
D) Freddy must recognize $300 (.03 × $20,000 × .5) gross income in 2014.
E) None of the above.