AB purchased a Central Maine Power Bond for $100,000 (also equaled the face/maturity amount) on January 1, 2021. The bond was issued with a coupon rate of 4%, compounded semi- annually. The maturity date was December 31, 2023. On June 30, 2021 the bond was valued at $105,000. On December 31, 2021 the bond was valued at $98,000. a. If AB classifies the bond as a TRADING SECURITY, record all transactions related to this asset holding in 2021. b. If AB classifies the bond as an AVAILABLE FOR SALE SECURITY, record all transactions related to this asset holding in 2021. c. ALTERNATIVELY, if the market rate of interest at the time of purchase was 6%, what would be the initial $ amount that AB would be required to pay if it classifies the bond as a HOLD TO MATURITY SECURITY?

AB purchased a Central Maine Power Bond for $100,000 (also equaled the face/maturity amount) on January 1, 2021. The bond was issued with a coupon rate of 4%, compounded semi- annually. The maturity date was December 31, 2023. On June 30, 2021 the bond was valued at $105,000. On December 31, 2021 the bond was valued at $98,000. a. If AB classifies the bond as a TRADING SECURITY, record all transactions related to this asset holding in 2021. b. If AB classifies the bond as an AVAILABLE FOR SALE SECURITY, record all transactions related to this asset holding in 2021. c. ALTERNATIVELY, if the market rate of interest at the time of purchase was 6%, what would be the initial $ amount that AB would be required to pay if it classifies the bond as a HOLD TO MATURITY SECURITY?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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