Landis Company purchased $2,000,000 of 8%, 5-year bonds from Ritter, Inc. on Jan

Question

Landis Company purchased $2,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2014, with interest payable on July 1 and January 1. The bonds sold for $2,083,160 at an effective interest rate of 7%. Using the effective-interest method, Landis Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums of $7,080 and $7,320, respectively.

At December 31, 2014, the fair value of the Ritter, Inc. bonds was $2,120,000. What should Landis Company report as other comprehensive income and as a separate component of stockholders' equity?

a. $36,840

b. $14,400

c. $51,240

d. No entry should be made.

Explanation / Answer

2120000-(2,083,160-7,080-7,320)

=$51,240

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.