Question
On January 1, 2017 a company purchased the following debt securities as an investment: Company Name Face Value Stated Interest Rate Effective Interest Rate Interest
On January 1, 2017 a company purchased the following debt securities as an investment:
| Company Name | Face Value | Stated Interest Rate | Effective Interest Rate | Interest Payment Date | Maturity Date | Purchase Price |
| Even | $100,000 | 5% | 5% | December 31 | December 31, 2030 | $100,000 |
| Low | $100,000 | 4% | 6% | December 31 | December 31, 2025 | $86,397 |
On December 31, 2020, the total market value for the portfolio is $195,000.
On December 31, 2021, the market value of each of the securities is as follows:
Even $102,000
Low $94,000
On December 31, 2022, the company sells the investment in Low for $96,000 and the market value of Even is $99,500.
- Determine the following amounts, assuming both securities are Held-to-Maturity Securities:
- Interest income, 2021
- Unrealized Gain/Loss on Held-to-Maturity Securities, 2021
- Gain/Loss on sale of Low, 2022
- Determine the following amounts, assuming both securities are Trading Securities:
- Unrealized Gain/Loss on Held-to-Maturity Securities, 2021
- Interest income, 2022
- Gain/Loss on sale of Low, 2022
- Determine the following amounts, assuming both securities are Available-for-Sale Securities:
- Gain/Loss on sale of Low, 2022
- Balance in the Fair Value Adjustment Available-for-Sale Securities, December 31, 2022
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Accounting Principles
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso
11th Edition
111856667X, 978-1118566671
