Illustrate what should landis report as other income- Business Management
Q. Landis Co. purchased $500,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2011, with interest payable on July 1 and January 1. The bonds sold for $520,790 at an effective interest rate of 7%. Using the effective-interest method, Landis Co. decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2011 and December 31, 2011 by the amortized premiums of $1,770 and $1,830, respectively.
At December 31, 2011 the fair value of the Ritter, Inc. bonds was $530,000. Illustrate what should Landis Co. report as other comprehensive income and as a separate component of stockholders’ equity?
