On July 1, Year 1, Walters Corporation purchased as a short-term investment a $2 million face amount Kempff 6% bond for $1,800,000 plus accrued interest to yield 8%. The bonds mature on January 1, Year 11, and pay interest annually on January 1. On December 31, Year 5, the bonds had a fair value of $1,850,000. On March 1, Year 6, Walters sold the bond for $1,820,000 At what amount should Walters
report the bond in its December 31, Year 5 balance sheet if it is classified as an available for sale security?
A) $1,800,000
B) $1,820,000
C) $1,850,000
D) $2,000,000
Answer: C
Explanation: C) For an available for sale security, the fair value is the reported value.
Business
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