1. How much gain or (loss) should be recognized on the sale of Orange bonds?2. How much unrealized gain or (loss) is to be recognized in the income statement for the current year?3. How much is the interest income at year end? PROBLEM 1:RED Company had the following transactions in bond investment held as trading for the current year:April 1- Purchased 2,000, P1,000, 12% bonds of Orange Company at 92 excluding accrued interest. Interest ispayable on February 1 and August 1April 30 – Purchased 3,000, #1,000, 10% bonds of Yellow Corporation at 96 plus accrued interest. Interest is payableMarch 1 and September 1October 1- Sold 1,200 of the Yellow bonds at 103 excluding interestNovember 30 - Sold 70% of the Orange bonds at 90 plus accrued interestDecember 31 - The market value of ORANGE bonds is 88; YELLOW Bonds is 105

Bond The purpose of issuing the bond is to generate the income to issue the debit which are utilized…

How much gain or (loss) should be recognized on the sale of Orange bonds? 2. How much unrealized gain or (loss) is to be recognized in the income statement for the current year? 3. How much is the interest income at year end?

How much gain or (loss) should be recognized on the sale of Orange bonds? 2. How much unrealized gain or (loss) is to be recognized in the income statement for the current year? 3. How much is the interest income at year end?

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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