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18 February, 05:57

On November 1, 2021, Blossom Company purchased Splish, Inc., 10-year, 10%, bonds with a face value of $900000, for $820000. An additional $34000 was paid for the accrued interest. Interest is payable semiannually on January 1 and July 1. The bonds mature on July 1, 2028. Blossom uses the straight-line method of amortization. Ignoring income taxes, the amount reported in Blossom's 2021 income statement as a result of Blossom's available-for-sale investment in Splish was

A. $9850.

B. $12150.

C. $13000.

D. $11000.

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  1. 18 February, 08:47
    0
    C. $13000

    Explanation:

    Face Value 900000

    Interest Rate 10%

    Half Yearly Interest Rate 5%

    900000 * 5% = 45,000

    Amortization = (900000 - 820000) * 2 months / 80 months = 2,000

    Accrued Interest = 34,000

    Amount reported in Blossom 2021 Income Statement

    = Total Interest + Amortization - Accrued Interest

    45,000 + 2,000 - 34,000

    = $13,000
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