purchased a 10-year bond from Beedle Company on 1/1/20X6. The bonds have a 6% annual interest rate a

purchased a 10-year bond from Beedle Company on 1/1/20X6. The bonds have a 6% annual interest rate and pay interest semi-annually on June 30 and December 31. The market rate of interest on 1/1/20X6 for bonds of similar risk was 5% (annual). The face value of the bonds purchased was $200,000.

The fair value of the bonds of the bonds at December 31 was as follows:

$ 213,200 12/31/20X6 

$ 213,300 12/31/20X7 

$ 212,000 12/31/20X8

Part 1. Assume Aeron does not make any special elections regarding the reporting of the bonds. Aeron intends to hold the bonds for 3 or 4 years, before selling them. Aeron prepares annual financial statements and completes any mark-to-market adjusting entries at the end of the year.

Assume Aeron has $50,000 of net income before considering ANY of the bond transactions. Aeron has no OCI (other comprehensive income) before considering any of the bond transactions. (Ignore taxes for all of these questions.)

1. What will Aeron report as net income for 20X6 with the bond transactions included?

2. What will Aeron report as Comprehensive income for 20X6 with the bond transactions included?