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Luba_88 [7]
3 years ago
8

Dyckman Dealers has an investment in Thomas Corporation bonds that Dyckman accounts for as a trading security. Thomas Corporatio

n's bonds are publicly traded and the prevailing market price indicates that Dyckman's investment is worth 20,000. However, Dyckman management believes that the bond market is generally overvalued, and their analysis of the Thomas investment suggests to them that it is worth $18,000. Dyckman should carry the Thomas investment on its balance sheet at:_____.
A) $20,000.
B) $18,000.
C) Either $18,000 or $20,000, as either are defensible valuations.
D) $19,000, the midpoint of Dyckman's range of reasonably likely valuations of Thomas.
Business
1 answer:
faust18 [17]3 years ago
3 0

Answer: $20,000

Explanation:

Bonds are to be carried in the books at their fair value which is their market value. That value is $20,000 in this instance and so Dyckman Dealers will have to record the bonds at that $20,000 value.

Investment analysis are not a basis for recording bond prices. They are simply a basis for making investment decisions. For instance, because they believe that the bond is overvalued, they can benefit from this by short selling the bond and waiting for it to drop in price.

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