Held-to-Maturity Bond Investment On January 1, 2016, Weaver Company purchased as held-to-maturity debt securities $500,000 face value of Park Corporation's 8% bonds for $456,200. The bonds were purchased to yield 10% interest and pay interest annually. The bonds mature on January 1, 2021. Weaver uses the effective interest method of amortization. What amount should Weaver report on its December 31, 2016, balance sheet as an investment in held-to-maturity debt securities? Oa. $450,580 Ob. $456,200 Oc. $466,200 V Od. $461,820 Feedback Check My Work Investments in held-to-maturity debt securities are initially recorded at cost and subsequently reported at amortized cost. Any unrealized holding gains and losses are not recorded but are disclosed in the notes to the financial statements. Interest income and realized gains and losses on sales are all included in net income.Discount Premium-Formula 1 =.Current market price (Paid.Amount) - -Historical-cost (Par-value) I =-Discount/Premium"| =-$456,200---$500,0009 =--$43,800T vFor example, a bond with a-$500,000-face value that's currently-selling for $456,200 would be. a.discounted-bond. --In another example, if a corporate-bond is trading at $456,000, it is- considered a discount-bond-since its value is-below the $500,000-par value.--As a-bond-becomes- discounted-or decreases in price, it means its coupon annual interest rate (coupon rate) is lower- than current yields. f (Step-1)T *$500,000.00 is face (par) value, or (future value, future cash flows, or future income stream) *$456,200.00 is present value (or present value of the future cash flows, present value of future- income stream, the current market price of-bond). 1*Park Company's-bond is currently being priced in the market at-$456,200.00.1 *Contract, or-Stated, interest rate and Annual coupon interest rate of 8% *Effective interest rate, also called-appropriate market interest rate, of-10% 100 =-0.087 =-$500,000.00-x-0.08 =.$40.0009 10 - 100 =0.101 =-$456,200.00-x 0.109 =-$45.6201 =-$45,620---$40,0001 =-$5.6209 $5,620-is Discount amortization.(Step-2)T =-$456,200+-$5,6209 =$461,8209 $461,820-should be reported as an investment. " $461,820 should be reported as an investment. Held-to-maturity investments should be reported at amortized cost on the balance sheet. The carrying value of long-term investments on December31, 2016, will be the carrying value on January 1, 2016, plus the discount amortization. Discount amortization is the difference between interest revenue and interest receivable. Interest revenue is the book value of the bonds times the yield rate of interest ($456,200 *0 .10 = $45,620).Interest receivable is the face value of the bonds times the face rate of interest ($500,000 *0.08 = $40,000). Discount Amortization = $45,620 - $40,000 = $5,620 Amount to reported as an investment = $456,200 + $5,620 = $461,820*Historical cost of Available-for-Sale-Securities (Marketable-Securities) is-$5,500,000.1 *Current market price, also called-Market value, of-Available-for-Sale-Securities (Marketable. Securities) is-$5,235,000.T =.Current market price (Market value) - Historical-cost =.Unrealized-Holding Gain LossT =-$5,235,000---$5,500,0009 =-$265,0009 *-$265,000-is Unrealized-Holding Loss I must report the-$265,000-decrease in fair value as an unrealized holding loss in its other- comprehensive income for December-31,-2017.1 Or, the fair value of the marketable securities decreased. -Therefore, this change in the dollar- amount has to be recorded (posted) at market value (price) on an adjusting journal entry-and has- to be affected against other comprehensive income." Adjusting Journal Entrya Dated Account-Title & Explanation Post-Ref. Debito Credito Dec.-31, 20170 Unrealized Holding Gain/(Loss) - $265,000% Marketable-Securities Held for Sale- (E+)a Marketable Securities (A-). D $265,0000