On January 1, 2015 the Happy Company issued 11% bonds, dated January 1 witha fac

Question

On January 1, 2015 the Happy Company issued 11% bonds, dated January 1 witha face amount of 800,000. The bonds sold for 739,820 and mature in 20 years. For bonds of similar risk and maturity the market yield is 12%. Interest is paid semi-annually on 6-30 and 12-31. Happy decides to amortize the bound discount under straight line approach and elects the option to report these bonds at fair value. On Dec 31, 2015 the fair value was 730,000.

What is the unrealized holding gain or loss the Happy company would report on its 2015 income statement realative to the bond?

Explanation / Answer

face value=800000

sold=739820

total=369910 of 6%=22194.6

discount=60180

fair value=730000

=707805.4=unrealised holding gain or loss

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