Nichols Enterprises has an investment in 27,000 bonds of Elliott Electronics that Nichols accounts for as a security available-for-sale. Elliott bonds are publicly traded, and The Wall Street Journal quotes a price for those bonds of $14 per bond, but Nichols believes the market has not appreciated the full value of the Elliott bonds and that a more accurate price is $24 per bond. Nichols should carry the Elliott investment on its balance sheet at: A) Either $378,000 or $648,000, as either are defensible valuations. B) $648,000. C) $378,000. D) $513,000, the midpoint of Nichols's range of reasonably likely valuations of Elliott.
Nichols Enterprises has an investment in 27,000 bonds of Elliott Electronics that Nichols accounts for as a security available-for-sale. Elliott bonds are publicly traded, and The Wall Street Journal quotes a price for those bonds of $14 per bond, but Nichols believes the market has not appreciated the full value of the Elliott bonds and that a more accurate price is $24 per bond. Nichols should carry the Elliott investment on its balance sheet at: A) Either $378,000 or $648,000, as either are defensible valuations. B) $648,000. C) $378,000. D) $513,000, the midpoint of Nichols's range of reasonably likely valuations of Elliott.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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