On January 9, 2006, Company X purchased $1,000,000 of government bonds and 100,000 shares of stock in Company S for $2,000,000. They are the first marketable securities purchased in the company’s history. The company intends on holding the stock for the foreseeable future and holding the bonds to maturity. As of December 31, the bonds were valued at $900,000, and the stocks were valued at $2,200,000. The bonds paid $50,000 of interest and the stocks paid $20,000 of dividends. In 2006, Company S had earnings per share of $0.90.
The marketable securities balance amount shown on the balance sheet is:
A)
$3,000,000.
B)
$3,200,000.
C)
$3,100,000.作者: mp3bu 时间: 2013-4-10 17:56
900 is the market value, not the amortized cost.作者: evolsteevol 时间: 2013-4-10 17:56
To Bubu & TvPM,
I think you have to assume that they bought the gov’t bonds at par because they don’t say otherwise. So amortization wouldn’t come into play here.
I can see how the term “valued” threw you off and made you think that is the amortized cost tho.作者: EastCoastJ 时间: 2013-4-10 17:56
The 50000 interest and 20000 dividends (realized gains) goes on the income statement, not balance sheet, so the answer is just 32000000.
