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kaheart [24]
3 years ago
8

Markel Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has not changed. Markel electe

d the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year?
Interest expense and a gain.

Interest expense and a loss.

A gain and no interest expense.

Interest expense and no gain or loss.
Business
1 answer:
Dimas [21]3 years ago
5 0

Answer: Interest expense and no gain or loss.

Explanation:

Since Markel Inc. has bonds outstanding during the year in which the general (risk-free) rate of interest has not changed, in its income statement for the year, the company's report for the bonds would be interest expense and no gain or loss.

Note that they have elected the fair value option for the bonds upon issuance, so no gain or loss is expected.

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Answer:

a. Reformation

Explanation:

In the given instance, it is clearly observed that the Vehicle Identification Number is not correctly written in the contract, and that happened due to typing errors, and was not intentional.

In these cases the courts order to reform the contract, and then the reformed contract shall reflect the intentions of both the parties as what they intend.

In the given case also, reformation will take place as the error is not due to intentionally, fraud with the other party. Thus correct option is:

a. Reformation

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The balance in the prepaid insurance account before adjustment at the end of the year is $27,000. Journalize the adjusting entry
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Answer:

(A)  Debit Insurance expense $20,250

     Credit Prepaid insurance $20,250

     Being entries to recognize insurance amortization expense for the year.

(B)  Debit Insurance expense $20,250

     Credit Prepaid insurance $20,250

     Being entries to recognize insurance amortization expense for the year.

Explanation:

Prepaid insurance account before adjustment = $27,000

(A) the amount of insurance expired during the year is $20,250

To account  for the expired amount,

Debit Insurance expense $20,250

Credit Prepaid insurance $20,250

Being entries to recognize insurance amortization expense for the year.

(B) the amount of unexpired insurance applicable to future periods is $6,750

Amount expired = $27,000 - $6,750

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To account  for the expired amount such that the amount of unexpired insurance applicable to future periods is $6,750,

Debit Insurance expense $20,250

Credit Prepaid insurance $20,250

Being entries to recognize insurance amortization expense for the year.

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