On January 1, 20x1, ABC Co. purchased 1 000 000 bonds at a price that reflects a yield rate of 14%. The bonds mature on January 1, 20x4 for trading securities. On December 31, 20x1, the bonds are selling at a yield rate 10%. How much is the unrealized gain (loss) on the change in fair value recognizing ABC's 20x1 profit or loss? Answer, solutions and explanations please.

On January 1, 20x1, ABC Co. purchased 1 000 000 bonds at a price that reflects a yield rate of 14%. The bonds mature on January 1, 20x4 for trading securities. On December 31, 20x1, the bonds are selling at a yield rate 10%. How much is the unrealized gain (loss) on the change in fair value recognizing ABC's 20x1 profit or loss? Answer, solutions and explanations please.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 7MCQ

See similar textbooks

Similar questions

Example 2) Fair value through profit or loss: Debt investment ABC Co. had the following transactions pertaining its trading investments: Feb. 1, 2021 Purchased $200,000 of 3-year, 6% bonds at 104. Interest is payable on each August 1 and February 1. Aug. 1, 2021 Received interest on the bonds. Dec. 31, 2021 The fair value of the bonds was 100. Instruction: Record the above transactions, using the fair value through profit or loss model. Also, prepare any required adjusting entry/entries at December 31, 2021. ABC Co. has a December 31 year-end.
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?
Q1: How much is the unrealized gain (loss) as part of OCI for the year ended 20x1? Q2: How much is the unrealized gain (loss) as component of equity as of December 31, 20x2?
1. Record the unrealized gains or losses occurring at year end. 2. Record the unrealized gains or losses occurring on the date of sale. 3. Record the sale of the Coca-Cola bonds in 2025.
1. Record the unrealized gains or losses occurring at year end. 2. Record the unrealized gains or losses occurring on the date of sale. 3. Record the sale of the Coca-Cola bonds in 2025.
Use the following information on a company's investments in debt securities to answer the following question. The company's accounting year ends December 31. Investment Date of Acquisition 9/20/23 $38,000 Colt Compan y bonds Cost Fair Value Date Sold Selling 12/31/23 Price $37,000 2/10/24 $42,000 Dana Compan y bonds 10/2/23 14,000 14,200 1/17/24 13,000 If the above investments are categorized as available-for-sale securities, what is the net effect on 2024 other comprehensive income? Select one: a. $ 800 increase b. $0 c. $3,800 increase d. $ 800 decrease
Req. 4: 1) Record the fair-value adjustment. 2) Record any reclassification adjustment. 3) Record the sale of the investment by Mills.
3. On January 1, 20x1, Allan Co. purchased P400,000 bonds for P392,000. The bonds mature on January 1, 20x5 and pay 12% annual interest beginning January 1, 20x2. Transaction costs are negligible. The bonds were classified as held for trading securities. On December 31, 20x1, the bonds are selling at a yield rate of 10%. How much is the unrealized gain (loss) recognized on December 31, 20x1?
Requ a. Using the present value tables in Chapter 6, calculate the proceeds (issue price) of Learned, Inc.'s, bonds on January 1, 2013, assuming that the bonds were sold to provide a market rate of return to the investor. b. Assume instead that the proceeds were $93,000,000. Use the horizontal model (or write the journal entry) to record the payment of semiannual interest and the related premium amortization on June 30, 2013, assuming that the premium of $3,000,000 is amortized on a straight-line basis. o 0ompound interest method
On the day Federer Ltd redeemed its $1,000,000 face value bonds at 98, their carrying value was $1,200,000. Prepare a residual analysis for the bond redemption. Prepare the journal entry for the bond redemption. If you recognise a gain or loss, state where in the Statement of Comprehensive Income the gain or loss should appear
N company purchased debt investment at amortized cost at a discount of P20,000. Subsequently, N sold these bonds at a premium of P28,000. During the period the N held this investment, amortization of discount amounted to P4,000. How much is the gain/loss on the sale of the debt investment?
Parrish Industries has bonds outstanding (originally sold for $5,400,000) in the amount of $6,000,000 with a current bond discount at 104 on the market at its year end. What should be the balance of the Fair Value Adjustment on Bonds Payable? Show your work. A. $840,000 debit balance B. $340,000 debit balance C. $840,000 credit balance D. $340,000 credit balance