Reference no: EM132614152
Question - Richman Co. purchased $600,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2012, with interest payable on July 1 and January 1. The bonds sold for $624,948 at an effective interest rate of 7%. Using the effective interest method, Richman Co. decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2012 and December 31, 2012 by the amortized premiums of $2,124 and $2,196, respectively.
At February 1, 2013, Richman Co. sold the Carlin bonds for $618,000. After accruing for interest, the carrying value of the Carlin bonds on February 1, 2013 was $620,250. Assuming Richman Co. has a portfolio of available-for-sale debt investments, what should Richman Co. report as a gain (or loss) on the bonds?
a. $0.
b. ($2,250).
c. ($13,122).
d. ($17,622).
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