Good Day I am stuck, I don\'t know where to start with calculating this question
ID: 2423931 • Letter: G
Question
Good Day I am stuck, I don't know where to start with calculating this question!
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On January 1, 20X5, Hillside Inc. bought $3,750,000 of five-year, 8% Straight Arrow bonds. The bonds pay interest annually on December 31. When Hillside bought the bonds, the market rate of interest was 7% and the company classified the bond investment as FVOCI.
Market value information on the bonds:
Date Market value
December 31, 20X5 $3,900,000
December 31, 20X6 3,800,000
December 31, 20X7 3,850,000
December 31, 20X8 3,650,000
December 31, 20X9 3,750,000
What is the balance in the reserves account — accumulated other comprehensive income (AOCI) — at December 31, 20X6, that is associated with these bonds?
a) $22,980 CR
b) $48,411 DR
c) $71,391 DR
d) $94,371 DR
Explanation / Answer
The balance in the reserves account — accumulated other comprehensive income (AOCI) — at December 31, 20X6, that is associated with these bonds is $50,000
Date Market value $ OCI OCI 01/01/2015 3,750,000 31/12/2015 3,900,000 150,000 31/12/2016 3,800,000 -100,000 50,000 31/12/2017 3,850,000 50,000 31/12/2018 3,650,000 -200,000 31/12/2019 3,750,000 100,000Related Questions
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