How much is the carrying amount of investment on december

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On January 1, 2018, Rei Company obtained $4,000,000 of 12% face value bonds at $3,767,000 to be held financial assets at amortized cost with a 14% effective yield. Interest on bonds is payable annually on December 31 and bonds mature on January 1, 2022. The effective interest method of amortization is used. The quoted price of the bonds is as follows: December 31, 2018: 97 December 31, 2019: 98 June 30, 2020: 99.

Problem a. What amount will be recognized as income on the 2018 income statement?

Problem b. What amount will be the gain (loss) on sale assuming all the bonds were sold on June 30, 2020 at 99 plus accrued interest?

Problem c. How much is the carrying amount of investment on December 31, 2018?

Reference no: EM132864544

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