On July 1, 2016, lames purchased a bond at par of $10.000 plus acrued interest o

Question

On July 1, 2016, lames purchased a bond at par of $10.000 plus acrued interest of $400, James collected the $800 in interest for the year James sold the bond on January 1, 2017. for $10.400. a $400 gain on the sale of the bond in 2017 a $400 gain on the sale of the bond in 2017. ?. James must recognize SS00 interest income for 2016 and a so gan or loss on the sale of de be an o d. James must recognize $400 interest income for 2016 and a $0 gain or loss on the sale of the bond in 2017 O e. James must recognize $300 interest income for 2016 and a $200 gain on the sale of the bond in 2017

Explanation / Answer

Answer : a. james must recognize $400 interest income for 2016 and a $400 gain on the sale of the bond in 2017.

Because in 2016 he bought for $10,400 out of interest receipt of 800 credit $400 to cost and balance $400 to interest income and net cost of bond is $10 000 and sale is $10 400 so profit of $400 is recognised in 2017

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