Reference no: EM132515703
Question - Presented below is selected information related to the financial instruments of Carla Company at December 31, 2017. This is Carla Company's first year of operations.
Carrying Amount Fair Value (at December 31)
Investment in debt securities (intent is to hold to maturity) $37,000 $38,100
Investment in Chen Company stock 801,600 905,700
Bonds payable 222,400 198,300
(a) Carla elects to use the fair value option for these financial instruments (the fair value option for financial liabilities is discussed in Chapter 14). Assuming that Carla's net income is $104,600 in 2017 before reporting any securities gains or losses, determine Carla's net income for 2017 (assume that the difference between the carrying value and fair value is due to credit deterioration).
(b) Record the journal entry, if any, necessary at December 31, 2017, to record the fair value option for the bonds payable.
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