Reference no: EM132545309
Question - Reclassification from Amortized Cost to FVPL
On January 1, 2018, Expeller Company purchased $2,000,000 face value bonds at a price of $1,824,800 which will yield an interest rate of 10%. The nominal rate on the bonds is 8% payable annually every December 31. The company's business model is to collect contractual cash flows that are solely payments of principal and interest.
On December 31, 2019, Expeller Company changed the business model in managing the collecting contractual cash flows that are solely payments of principal and interest to realizing short term gains. The market value of the bonds on January 1, 2020 is 105
Required -
1. What amount should be reported as interest income for 2019?
2. What is the carrying amount of the bonds on December 31, 2019?
3. On classification date, what amount of gain/loss on reclassification of a financial asset should be recognized by Expeller Company?
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