Question

In 2021, Cromwell Corporation purchased bonds of Oliver Company at par for $300,000 and classified the investment as available-for-sale. In 2022, the market value declined to $200,000. In 2023, the market value of the investment rose to $230,000, and the investment was sold. How much should Cromwell record as a realized gain or loss in its determination of net income for 2023?

Answer 1

Answer:

$70,000 loss

Explanation:

Cromwell corporation bought bonds of Oliver company at par at $300,000 in the year 2021

In 2022, the market value reduced to $200,000

In the year 2023, The market value rose to $230,000

Therefore the amount that should be recorded be Cromwell corporation as its realized loss or gain in the determination of net income for 2023 can be calculated as follows

= $230,000 - $300,000

= -$70,000

= $70,000 loss

Hence the amount that should be recorded by Cromwell corporation is $70,000 loss