Brubaker Company issued 11% bonds, dated January 1, with a face amount of $400,000 on January 1, 2018. The bonds sold for $369,908 and mature in 2035 (20 years). For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Brubaker determines interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $365,000 as determined by their market value on the NYSE. Brubaker’s statement of comprehensive income for the year will include:

The carrying value of the bonds was $370,308 on December 31, but the market value was only $365,000. Any decrease in the market value of a liability must be reported as a gain under total comprehensive income.

JackelineCasarez JackelineCasarez · Answer 2 · 2022-02-16T08:25:38+01:00

The element that Brubaker's comprehensive income statement would include would be:

A). A gain from change in the fair value of debt of $5,309.

Comprehensive Income Statement

As per the details provided, the distinction between the book value and fair value dated 31st December is the $5,309 debt.

The book value is increased to the amount $369,908 through the amortization discount between June 30 and Dec. 31.

Since the alteration in fair value's amount dedicated in the ordinary interest would be characterized as net income, an increase in credit risk is called OCI. Thus, they both would add to the total comprehensive income.

Thus, option A is the correct answer.

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The options are missing in the question. They are as follows:

A gain from change in the fair value of debt of $5,309.

A loss from change in the fair value of debt of $5,309.

A gain from change in the fair value of debt of $5,102.

A loss from change in the fair value of debt of $5,102.