Crane Company purchased $1080000 of 8%, 5-year bonds from Swifty, Inc. on January 1, 2021, with interest payable on July 1 and J
anuary 1. The bonds sold for $1129896 at an effective interest rate of 7%. Using the effective interest method, Crane Company decreased the Available-for-Sale Debt Securities account for the Swifty, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $3048 and $3192, respectively. At December 31, 2021, the fair value of the Swifty, Inc. bonds was $1164000. What should Crane Company report as other comprehensive income and as a separate component of stockholders’ equity? $40344
The amount that should be recorded as other comprehensive income is the fair value less the sales price and the amortized premiums to reflect the true value of the investment,
= 1,164,000 - 1,129,896 - 3,048 - 3,192
= $27,864
$27,864 is the amount Crane Company should report as other comprehensive income and as a separate component of stockholders’ equity.
