Question

On July 1, 2008, J.C. Penney purchased 8-year, 12% bonds having maturity a value of $598,000. Interest is paid semi-annually on June 30 and December 31 and the bonds provide the bondholders a 8% yield. J.C. Penney uses the effective-interest method to amortize discount or premium. At the time of acquisition, the bonds were classified as trading. The fair value of the bonds on December 31, 2011 is $558,000. The fair value of the bonds as of December 31 of the immediately preceding year (prior measurement date) was $593,000. What is the amount of net income recognized in the 2011 income statement solely as a result of these bonds? (Note: if the net amount results in a loss, enter a minus sign '-' prior to the amount. If the net amount results in income, enter the amount as a positive amount.) answer is not 55,911 or 36,760

Answer 1

When investments are classified as trading than unrealized gain and losses are recognized in the year
in which is incurred
Fair value of bonds on Dec 31 2011	558000
Fair value of bonds on Dec 31 2010	$593,000
Net loss	($35,000)
This should be the answer. If any doubt please comment