
(1)
Bonds
Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.
To Calculate: The increase/decrease amount of A’s comprehensive income in the March 31 quarterly financial statement.
(1)

Explanation of Solution
Calculate increase/decrease amount of A’s comprehensive income in the March 31 quarterly financial statement.
Particulars | Amount |
Interest expense – Net income (1) | $8,284 |
Add: Unrealized holding loss – Other comprehensive income (OCI) (4) | $10,352 |
Decrease in comprehensive income | $18,636 |
Table (1)
Working notes:
Calculate the interest expense on the bond as on March 31, 2016.
Hence, interest expense amount is $8,284.
(1)
Calculate discount on bonds payable on March 31, 2016.
Hence, discount on bonds payable amount is $284.
(2)
Calculate the book
Hence, book value of bonds amount is $339,648.
(3)
Calculate the amount of fair value adjustment on March 31, 2016.
(4)
Hence, fair value adjustment amount is $10,352.
Therefore, decrease in other comprehensive income amount is $18,636 for March 31 quarterly financial statements.
(2)
To Calculate: The increase/decrease amount of A’s comprehensive income in the June 30 quarterly financial statement.
(2)

Explanation of Solution
Calculate increase/decrease amount of A’s comprehensive income in the June 30 quarterly financial statement.
Particulars | Amount |
Interest expense – Net income (5) | $8,284 |
Add: Unrealized holding gain – Other comprehensive income (OCI) (8) | $(2,284) |
Decrease in comprehensive income | $6,000 |
Table (2)
Working notes:
Calculate the interest expense on the bond as on June 30, 2016.
Hence, interest expense amount is $8,284.
(5)
Calculate discount on bonds payable on June 30, 2016.
Hence, discount on bonds payable amount is $284.
(6)
Calculate the book value of bonds at June 30, 2016.
Hence, book value of bonds amount is $331,932.
(7)
Calculate the amount of fair value adjustment on June 30, 2016.
Hence, fair value adjustment amount is $2,284.
(8)
Therefore, decrease in other comprehensive income amount is $6,000 for June 30 quarterly financial statements.
(3)
To Calculate: The increase/decrease amount of A’s comprehensive income in the September 30 quarterly financial statement.
(3)

Explanation of Solution
Calculate increase/decrease amount of A’s comprehensive income in the September 30 quarterly financial statement.
Particulars | Amount |
Interest expense – Net income (9) | $8,298 |
Unrealized holding gain – Other comprehensive income (OCI) (12) | $(13,298) |
Decrease in comprehensive income | $5,000 |
Table (3)
Working notes:
Calculate the interest expense on the bond as on September 30, 2016.
Hence, interest expense amount is $8,298.
(9)
Calculate discount on bonds payable on September, 2016.
Hence, discount on bonds payable amount is $298.
(10)
Calculate the book value of bonds at September 30, 2016.
Hence, book value of bonds amount as on 30th September is $340,230.
(11)
Calculate the amount of fair value adjustment on September 30, 2016.
Hence, fair value adjustment amount is $13,298.
(12)
Therefore, decrease in other comprehensive income amount is $5,000 for September 30 quarterly financial statements.
(4)
To Calculate: The increase/decrease amount of A’s comprehensive income in the December 31 quarterly financial statement.
(4)

Explanation of Solution
Calculate increase/decrease amount of A’s comprehensive income in the December 31 quarterly financial statement.
Particulars | Amount |
Interest expense – Net income (13) | $8,298 |
Add: Unrealized holding loss – Other comprehensive income (OCI) (16) | $14,702 |
Decrease in comprehensive income | $23,000 |
Table (4)
Working notes:
Calculate the interest expense on the bond as on December 31, 2016.
Hence, interest expense amount is $8,298.
(13)
Calculate discount on bonds payable on December 31, 2016.
Hence, discount on bonds payable amount is $298.
(14)
Calculate the book value of bonds at December 31, 2016.
Hence, value of the bonds as on 31st December 2018 is $332,528.
(15)
Calculate the amount of fair value adjustment on December 31, 2016.
Hence, fair value adjustment amount is $14,702.
(16)
Therefore, decrease in other comprehensive income amount is $23,000 for December 31 quarterly financial statements.
To Calculate: The increase/decrease amount of A’s comprehensive income in the December 31 annual financial statement.

Explanation of Solution
Calculate increase /decrease amount of A’s comprehensive income in the December 31 annual financial statement.
Particulars | Amount |
First quarter interest expense | $8,284 |
Second quarter interest expense | $8,284 |
Third quarter interest expense | $8,298 |
Fourth quarter interest expense | $8,298 |
First quarter unrealized holding loss – OCI | $10,352 |
Second quarter unrealized holding gain – OCI | $(2,284) |
Third quarter unrealized holding gain – OCI | $(13,298) |
Fourth quarter unrealized holding loss – OCI | $14,702 |
Decrease in 2016 comprehensive income | $42,636 |
Table (5)
Therefore, decrease in other comprehensive income amount is $42,636 for December 31 annual financial statements.
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Chapter 14 Solutions
INTERMEDIATE ACCOUNTING WITH AIR FRANCE-KLM 2013 ANNUAL REPORT
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