Reference no: EM133175058
Question - The Minimax Corp. is a manufacturer of aircraft components. After a period of strong results in their core business, Minimax has a surfeit of cash on hand. Rather than just putting the cash in the bank to earn a small amount of interest, Minimax invests $5,000,000 in a bond of Synod Company.
They purchase the bond on October 1, 2017, for $101. The bond was issued at par and has a stated rate of 6% annually. Coupons are paid on calendar quarters; similarly, Minimax provides financial reports on a quarterly basis.
The prices of the bond, based on similar bond trading on the organized market are as follows:
|
Date
|
Price
|
|
December 31, 2017
|
$102
|
|
March 31, 2018
|
$102.5
|
|
June 30, 2018
|
$103.5
|
|
September 30, 2018
|
$103
|
|
December 31, 2018
|
$104
|
|
March 31, 2019
|
$102.5
|
On April 1, 2019, Minimax sells the bond for $102.25.
Required - Calculate the impact on net income of holding the bond, assuming it is classified a} as a trading security or b) available-for-sale.