Reference no: EM133110188
Question - Marsey Company invested in a bond on 1/1/22. On 3/11/2022, Marsey invested in two shares of stock. Ignore income taxes for this question.
The 10-year bond, issued by Morey Corporation, had the following attributes:
Bond issue date: 1/1/2022
Bond issue price on 1/1/22: 139,934.88 (i.e., 93.2899)
Principal (face value) of bond: 150,000.00
Face (stated) interest rate: 7%, interest, paid each December 31, starting 12/31/22
Market rate (yield) at issuance: 8%
Interest periods: 10 annual
Bond market value on 12/31/22: 114.00
Bond market value on 12/31/23: 96.00
On 3/11/2022, Marsey purchased 2 (two) shares of Beat Corporation's $1 par value/share common stock for $21 (Beat has 50,000 total shares outstanding). Beat declared and paid a cash dividend of $.90/share on 7/15/2022 and declared and paid a cash dividend of $1.10/share on 7/15/2023. On 12/31/22, the stock's value was $24/share, and on 12/31/23 its value was $17/share.
A) How does the bond investment affect net income for 2023 if the bond is classified as (for each, provide a dollar amount and indicate increase or decrease):
A1) Available-for-sale:
A2) Trading:
B) If the bond was sold on 1/1/2024 for $125,000, what is the gain or loss on sale if the bond is classified as (provide a dollar amount for each and indicate gain or loss):
B1) Trading:
B2) Held-to-maturity:
C) What is the impact of the investment in Beat's common stock on net income in 2023?