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What is the carrying amount of the bond investment

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Reference no: EM132819285

ABC Company:

On January 1, 2020, ABC Company purchased bonds with a face amount of 4,000,000 for 3,801,000. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds in the open market.

  1. the entity has not elected the fair value option of measuring financial asset.
  2. the bonds mature on December 31,2022 and pay 8% interest annually on December 31 each year with 10% effective yield.
  3. the bonds are quoted at 97 on December 31,2020 and 101 on December 31 2021.

REQUIRED:

Problem 1: What amount of unrealized gain or loss should be reported as component of other comprehensive income in 2020?

Problem 2: What amount of unrealized gain or loss should be reported as component of other comprehensive income in 2021?

Problem 3: What amount of cumulative unrealized loss should be reported in the statement of changes in equity on December 31, 2021?

Problem 4: What is the carrying amount of the bond investment to be reported on December 31, 2021?

Reference no: EM132819285

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