It is to be noted that Richman Company should report Option 2) 22,104 as other comprehensive income and as a sperate component of the stockholder's equity.
1. Unrealized Holding Gain Calculation
- Original cost is $1,249,896
- Amortized premium is -$8,640
- Adjusted carrying value: $1,241,256
- Fair value $1,272,000
- Unrealized holding gain is $30,744
2. Recognition and Accumulation -
- Unrealized gain, not in net income.
- Accumulated in stockholders' equity as AOCI - $22,104
- Adjusted for prior amortization is $30,744 - $8,640 = $22,104
Thus, the comprehensive income and as a sperate component of the stockholder's equity is $22,104.
Full Question:
Although part of your question is missing, you might be referring to this full question:
Richman Company purchased $1,200,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2018, with interest payable on July 1 and January 1. The bonds sold for $1,249,896 at an effective interest rate of 7%. Using the effective interest method, Richman Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2018 and December 31, 2018 by the amortized premiums of $4,248 and $4,392, respectively.
Reference: Ref 17-4
At December 31, 2018, the fair value of the Carlin, Inc. bonds was $1,272,000. What should Richman Company report as other comprehensive income and as a separate component of stockholders' equity?
1) 8,640
2) 22,104
3) 30,744
4) 0