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How much should be the gain from change in fair value

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Reference no: EM132858857

In the beginning of year 2020, Kai Corporation bought 12% bonds which has a face amount of $5,000,000 for $5,500,000 which included a transaction cost of $100,000. The bonds provide an effective yield of 10%, which are dated January 1, 2020 and will mature on January 1, 2025 and pay interest annually on December 31 of each year. The bonds are quoted at 115 on December 31, 2020. The entity irrevocably elected to use the fair value option.

Problem a. How much should be the gain from change in fair value for 2020?

Problem b. How much should be the interest income for 2020?

Reference no: EM132858857

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