Fowler Inc. purchased $86,000 of bonds on January 1, 2018. The bonds pay interest semiannually and mature in 25 years, at which time the $86,000 principal will be paid. The bonds do not pay any amounts other than interest and principal. During 2018, the fair value of the bonds increased to $102,000. Fowler reports investments under IFRS No. 9. Fowler intends to hold the bonds until maturity. How much unrealized gain or loss would Fowler include in 2018 net income with respect to the bonds?

Question

Jayda Trevino

Business

10 September, 07:35

Fowler Inc. purchased $86,000 of bonds on January 1, 2018. The bonds pay interest semiannually and mature in 25 years, at which time the $86,000 principal will be paid. The bonds do not pay any amounts other than interest and principal. During 2018, the fair value of the bonds increased to $102,000. Fowler reports investments under IFRS No. 9. Fowler intends to hold the bonds until maturity. How much unrealized gain or loss would Fowler include in 2018 net income with respect to the bonds?

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Answers (1)

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Valerie Young · Answer 1

zero

Explanation:

As it will be hold until maturity Fowler Inc will ignore the fluctuation in the fair value as have no impact in the future cash flow from the bond (coupon payment and principal at maturity) Thus, Fowler Inc will use amortized cost as a method to valuation rather than fair value through other comprehensive income