2.

On 1/1/2017 the Cash Heavy Company had a single investment in

bonds. It had purchased the bonds for $12,000,000 at 9 am on

12/31/2016. During the day, the bonds declined in value from

$12,000,000 to $11,900,000. The bonds had a face value of

$12,500,000, a stated interest rate of 5% payable each six months

with interest payable 6/30 and 12/30, and were scheduled to mature

on 12/30/2023.

On 12/31/2017, the market value of the bonds was $11,950,000

On 12/31/2018, the market value of the bonds was $11,975,000

Assume the Cash Heavy Company accounted for the bonds as a

trading security?

a. What interest income would the Cash Heavy Company record for

the year ending 2017?

$ _____________

b. What interest income would the Cash Heavy Company record for

the year ending 2018?

$ _____________

c. What unrealized gain or loss would the Cash Heavy Company

record for the year ending 2017?

$ _____________

d. What pretax unrealized gain or loss would the Cash Heavy

Company record in Other Comprehensive Income for the year

ending 2018?

$ _____________

e. Would the valuation account used to mark the bond investment to

market value on the balance sheet differ depending on whether the

bond was accounted for as a Trading Security or as an Available for

Sale Security?

Circle:

It would differ

It would not differ