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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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EMK Corp. is holding two bonds to maturity, both of which have a book value of $132,000. At the end of the fiscal year, the fair market value of Bond A is SI 18,000, and the fair market value of Bond B is SI36,000. What is the unrealized gain or loss reported on the financial statements on these two bonds?

a. Unrealized gain of S4.000

b. Unrealized loss of S 10,000

c. Unrealized loss of $ 14,000

d. No unrealized gain or loss is reported

Refer to the following information for Multiple-Choice Questions A2S and A2-9:

Shackley Inc. owns three available-for-sale debt securities which have yielded the following fiscal year end results:

A. Interest income: $350

B. Gain on sale: $2,000

C. Unrealized loss: S600

To determine

Introduction:

The debt security is a security that is issued when a company owes a blend of interest amount and principal amount to another company.

To choose:

The option that states the unrealized gain or loss at year end.

Explanation
Situation Result Calculation
Acquisition Cost > Fair Market Value Unrealized Loss Acquisition Cost - Fair Market Value
Acquisition Cost < Fair Market Value Unrealized Gain Fair Market Value - Acquisition Cost

Bond A:

Acquisition Cost of Security = $132,000

Fair Market Value = $118,000

Here, Acquisition Cost > Fair Market Value

...

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