Question

On January 1, 2018, Normal Plastics bought 15% of Model, Inc.'s outstanding bonds for $900,000. On October 1, 2019, the bonds were valued at $1,026,000 and Normal sold half of the amount it purchased. On December 31, 2019, the remaining bonds were valued at $580,000. How much should Normal show on its 2019 income statement from this investment, assuming that it accounts for it as an available-for-sale investment?

Answer 1

Answer:

$63,000

Explanation:

The computation of the income statement from this investment is shown below:

= (Value of the bond - outstanding bond) ÷ criteria

= ($1,026,000 - $900,000) ÷ 2

= $126,000 ÷ 2

= $63,000

The outstanding bond value is subtracted from the value of the bond and the amount that comes is divided by 2 so that the actual amount could come.