Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Reclassification from Amortized Cost to FVPL On January 1, 2018, Expeller Company purchased $2,000,000 face value bonds at a price of $1,824,800 which will yield

Reclassification from Amortized Cost to FVPL

On January 1, 2018, Expeller Company purchased $2,000,000 face value bonds at a price of $1,824,800 which will yield an interest rate of 10%.The nominal rate on the bonds is 8% payable annually every December 31.The company's business model is tocollect contractual cash flows that are solely payments of principal and interest.

On December 31, 2019, Expeller Company changed the business model in managing the collecting contractual cash flows that are solely payments of principal and interest to realizing shortterm gains. The market value of the bonds on January 1, 2020 is 105

Required:

1. What amount should be reported as interest income for 2019?

2. What is the carrying amount of the bonds on December 31, 2019?

3. On classification date, what amount of gain/loss on reclassification of a financial asset should be recognized by Expeller Company?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Core Concepts Financial Analysis

Authors: Gary Giroux

1st Edition

047146712X, 9780471467120

More Books

Students also viewed these Accounting questions

Question

The relevance of the information to the interpreter

Answered: 1 week ago

Question

The background knowledge of the interpreter

Answered: 1 week ago