Question

Daniel purchased a bond on July 1, 2017, at par of $10,000 plus accrued interest of $300. On December 31, 2017, Daniel collected the $600 interest for the year. On January 1, 2018, Daniel sold the bond for $10,200.a. Daniel must recognize $300 interest income for 2017 and a $200 gain on the sale of the bond in 2018.b. Daniel must recognize $600 interest income for 2017 and a $200 gain on the sale of the bond in 2018.c. Daniel must recognize $600 interest income for 2017 and a $100 loss on the sale of the bond in 2018.d. Daniel must recognize $300 interest income for 2017 and a $100 loss on the sale of the bond in 2018.e. None of these.

Answer 1

Answer:

a. Daniel must recognize $300 interest income for 2017 and a $200 gain on the sale of the bond in 2018

Explanation:

Since the interest was collected of $600 and the accrued interest is $300, so the remaining amount $300 reflect the interest income

And,  the sale value of the bond is $10,200 without considering the interest collection  and its purchase price without considering the accrued interest is $10,000. So, after comparing the purchase price and the sale price the gain of $200 would be determined

$10,200 - $10,000 = $200