Chapter 1 Problem 12-7
Requirement 1
Discount
Date Interest received Interest income amortization Book value
01/01/2008 1,900,500
12/31/2008 160,000 190,050 30,050 1,930,550
12/31/2009 160,000 193,055 33,055 1,963,605
12/31/2010 160,000 196,395 36,395 2,000,000
Requirement 2
2008
Jan. 1 Available for sale securities 1,900,500
Cash 1,900,500
Dec. 31 Cash 160,000
Interest income 160,000
31 Available for sale securities 30,050
Interest income 30,050
31 Available for sale securities 269,450
Unrealized gain – AFS 269,450
Market value (2,000,000 x 110) 2,200,000
Carrying amount 1,930,550
Unrealized gain 269,450
2009
Dec. 31 Cash 160,000
Interest income 160,000
31 Available for sale securities 33,055
Interest income 33,050
31 Available for sale securities 166,945
Unrealized gain 166,945
Market value 12/31/2009 (2,000,000 x 120) 2,400,000 Book value per table – 12/31/2009 1,963,605
Cumulative unrealized gain – 12/31/2009 436,395
Unrealized gain – 12/31/2008 269,450
Increase in 2009 166,945
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