On July 1, Year 1, Walters Corporation purchased as a short-term investment a $2

Question

On July 1, Year 1, Walters Corporation purchased as a short-term investment a $2 million face amount Kempff 6% bond for $1,769,376 plus accrued interest to yield 8%. The bonds mature on January 1, Year 11, and pay interest annually on January 1. On December 31, Year 5, the bonds had a fair value of $1,850,000. On March 1, Year 6, Walters sold the bond for $1,830,000. At what amount should Walters report the bond in its December 31, Year 5 balance sheet if it is classified as an available-for-sale security?

a. $1,769,376

b. $1,830,000

c. $1,850,000

d. $2,000,000

Explanation / Answer

The available for sale securities are to be reported at fair market value

The fair market value on December 31, Year 5 = 1,850,000

The answer is C

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