Asked by Lindsay Drake on Apr 24, 2024
Verified
On July 1, 2010, Richmond Company purchased 8% bonds of Commonwealth Corporation with a par value of $400, 000 for $350, 000 to yield 10%.The bonds are to be held to maturity and pay interest semiannually on June 30 and December 31.The market value of the bonds on December 31, 2010, was $380, 000.Richmond should report the bond investment at December 31, 2010, at
A) $350, 000
B) $351, 500
C) $364, 000
D) $380, 000
Bonds
Financial instruments representing a loan made by an investor to a borrower, typically corporate or governmental, where the borrower commits to paying back the principal along with interest on a specified schedule.
Amortized Cost
Amortized cost is an investment's acquisition cost adjusted for amortization, impairment charges, and any accumulated payment or receipts since acquisition.
Market Value
The market's current rate for buying or selling an asset or service.
- Gain a thorough understanding of the distinct categories of investments (trading, available-for-sale, held-to-maturity) and the accounting treatments relevant to each.
- Learn to manage the accounting for debt security investments, apart from those securities which fail to qualify.
Verified Answer
Learning Objectives
- Gain a thorough understanding of the distinct categories of investments (trading, available-for-sale, held-to-maturity) and the accounting treatments relevant to each.
- Learn to manage the accounting for debt security investments, apart from those securities which fail to qualify.
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