What should crane company report as a gain on the bonds

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Reference no: EM132986792

Crane Company purchased $ 1190000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $ 1239996 at an effective interest rate of 7%. Using the effective interest method, Crane Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $ 4148 and $ 4292, respectively.

Problem 1: At February 1, 2022, Crane Company sold the Carlin bonds for $ 1225900. After accruing for interest, the carrying value of the Carlin bonds on February 1, 2022 was $ 1230500. Assuming Crane Company has a portfolio of available-for-sale debt investments, what should Crane Company report as a gain (or loss) on the bonds?

Option 1: $ -4600.
Option 2: $0.
Option 3: $ -14096.
Option 4: $ -9496.

Reference no: EM132986792

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