Bruce Company purchased $2,000,000 of Clarence, Incorporated, 4.0% bonds at par on July 1, 2024, with interest paid semi-annually. Bruce determined that it should account for the bonds as an available-for-sale investment. At December 31, 2024, the Clarence bonds had a fair value of $2,300,000. Bruce sold the Clarence bonds on July 1, 2025 for $1,950,000. Face amount of bond $2,000,000 Stated (and market) rate 4.0% December 31, 2024 fair value of bonds $2,300,000 Selling price of bonds, July 1, 2025 $1,950,000 Complete the following tables to show the effect of the Clarence bonds on Bruce’s net income, other comprehensive income, and comprehensive income for 2024, 2025, and cumulatively over the two-year period. FORMULAS FOR LOSSES MUST RETURN NEGATIVE VALUES. 2024 2025 Total Interest revenue $40,000 $40,000 $80,000 Gain (loss) on investment (Net income) 0 (50,000) (50,000) Gain (loss) on investment (Unrealized) 300,000 (350,000) (50,000) Reclassification adjustment (OCI) 300,000 300,000 600,000 2024 2025 Total Net income $40,000 ($10,000) $30,000 Other Comprehensive income 300,000 (350,000) (50,000) Comprehensive income $340,000 ($360,000) ($20,000)
Bruce Company purchased $2,000,000 of Clarence, Incorporated, 4.0% bonds at par on July 1, 2024, with interest paid semi-annually. Bruce determined that it should account for the bonds as an available-for-sale investment. At December 31, 2024, the Clarence bonds had a fair value of $2,300,000. Bruce sold the Clarence bonds on July 1, 2025 for $1,950,000. Face amount of bond $2,000,000 Stated (and market) rate 4.0% December 31, 2024 fair value of bonds $2,300,000 Selling price of bonds, July 1, 2025 $1,950,000 Complete the following tables to show the effect of the Clarence bonds on Bruce’s net income, other comprehensive income, and comprehensive income for 2024, 2025, and cumulatively over the two-year period. FORMULAS FOR LOSSES MUST RETURN NEGATIVE VALUES. 2024 2025 Total Interest revenue $40,000 $40,000 $80,000 Gain (loss) on investment (Net income) 0 (50,000) (50,000) Gain (loss) on investment (Unrealized) 300,000 (350,000) (50,000) Reclassification adjustment (OCI) 300,000 300,000 600,000 2024 2025 Total Net income $40,000 ($10,000) $30,000 Other Comprehensive income 300,000 (350,000) (50,000) Comprehensive income $340,000 ($360,000) ($20,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
| Bruce Company purchased $2,000,000 of Clarence, Incorporated, 4.0% bonds at par on July 1, 2024, with interest paid semi-annually. Bruce determined that it should account for the bonds as an available-for-sale investment. At December 31, 2024, the Clarence bonds had a fair value of $2,300,000. Bruce sold the Clarence bonds on July 1, 2025 for $1,950,000. | |||||||||
| Face amount of bond | $2,000,000 | ||||||||
| Stated (and market) rate | 4.0% | ||||||||
| December 31, 2024 fair |
$2,300,000 | ||||||||
| Selling price of bonds, July 1, 2025 | $1,950,000 | ||||||||
| Complete the following tables to show the effect of the Clarence bonds on Bruce’s net income, other comprehensive income, and comprehensive income for 2024, 2025, and cumulatively over the two-year period. FORMULAS FOR LOSSES MUST RETURN NEGATIVE VALUES. | |||||||||
| 2024 | 2025 | Total | |||||||
| Interest revenue | $40,000 | $40,000 | $80,000 | ||||||
| Gain (loss) on investment (Net income) | 0 | (50,000) | (50,000) | ||||||
| Gain (loss) on investment (Unrealized) | 300,000 | (350,000) | (50,000) | ||||||
| Reclassification adjustment (OCI) | 300,000 | 300,000 | 600,000 | ||||||
| 2024 | 2025 | Total | |||||||
| Net income | $40,000 | ($10,000) | $30,000 | ||||||
| Other Comprehensive income | 300,000 | (350,000) | (50,000) | ||||||
| Comprehensive income | $340,000 | ($360,000) | ($20,000) | ||||||
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