Reference no: EM131909893

Questions -

1. On January 1, 2012 Morlock Associates purchased 5-year, 5% bonds having maturity a value of $350000. Interest is paid semi-annually on June 30 and December 31 and the bonds provide the bondholders a 13% yield. Morlock Associates uses the effective-interest method to amortize discount or premium. At the time of acquisition, the bonds were classified as available-for-sale. The fair value of the bonds on December 31, 2014 is $255900. The fair value of the bonds on the immediately preceding measurement date was $254600.

What is the amount of net income recognized in the 2014 income statement solely as a result of these bonds?

2. On January 1, 2012 Goldstone purchased 5-year, 7% bonds having maturity a value of $390000. Interest is paid semi-annually on June 30 and December 31 and the bonds provide the bondholders a 9% yield. Goldstone uses the effective-interest method to amortize discount or premium. At the time of acquisition, the bonds were classified as trading. The fair value of the bonds on December 31, 2014 is $358900. The fair value of the bonds as of December 31 of the immediately preceding year (prior measurement date) was $350300.

What is the amount of net income recognized in the 2014 income statement solely as a result of these bonds?

3. Amacor acquired 40% of Darby's voting stock on January 1, 2012 for $836000. During 2012, Darby earned $288000 and paid dividends of $106000. Amacor's 40% interest in Darby gives Bennett & Sanders the ability to exercise significant influence over Darby's operating and financial policies. During 2013, Darby earned $394000 and paid dividends of $48000 on April 1 and $25000 on October 1. On July 1, 2013, Amacor sold 32% of its stock in Darby for $181800 cash.

What should be the gain or loss recorded in Amacor's 2013 income statement on the sale of this investment?