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Company has a calendar reporting year. Company purchased a 6-year bond for $100,000 on December 20

Questions and AnswersPosted On:2023-08-02 09:22:51Viewed:180

Company has a calendar reporting year.   Company purchased a 6-year bond for $100,000 on December 20, Year3.  The bond was purchased at face value. On December 31, Year3 the fair value of the bond was $102,000.

 

1. Assume the bond will be sold in early January, Year4.

1A.  At what amount will the bond be reported on the balance sheet at 12/31/Year3?  Type 100,000 or 102,000(you can use commas).

1B.  Will the unrealized gain be included in Year3 net income?  Type Yes or No

 

2. Assume the bond will be held for a few years and then sold.

2A.  At what amount will the bond be reported on the balance sheet at 12/31/Year3?  Type 100,000 or 102,000(you can use commas). 

2B.  Will the unrealized gain be included in Year3 net income?  Type Yes or No. 

 

3. Assume the bond will be held until maturity.

3A.  At what amount will the bond be reported on the balance sheet at 12/31/Year3?  Type 100,000 or 102,000(you can use commas). 

3B.  Will the unrealized gain be included in Year3 net income?  Type Yes or No.


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Last updated on:2023-08-02 09:22:51

Option 1

  • 1A. 100,000 

  • 1B. No 

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  • No, the unrealized gain will not be included in Year3 net income because the gain has not yet been realized. Gains must be realized in order to be included in net income, and since the bond will not be sold until maturity, the gain has not been realized and thus it cannot be included in Year3 net income.


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