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Sheridan Company purchased $2650000 of 7%, 5-year bonds from Ritter, Inc. on January 1, 2018, with interest payable on J...

Sheridan Company purchased $2650000 of 7%, 5-year bonds from Ritter, Inc. on January 1, 2018, with interest payable on July 1 and January 1. The bonds sold for $2774740 at an effective interest rate of 6%. Using the effective-interest method, Sheridan Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2018 and December 31, 2018 by the amortized premiums of $9920 and $10280, respectively.

At December 31, 2018, the fair value of the Ritter, Inc. bonds was $2830000. What should Sheridan Company report as other comprehensive income and as a separate component of stockholders' equity?

$75460.
$55260.
$20200.
No entry should be made.
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Answer #1
Bond Carrying value at December 31, 2018 2754540 =2774740-9920-10280
Bonds Fair value 2830000
Less: Bond Carrying value at December 31, 2018 2754540
Other comprehensive income 75460
Option A $75460 is correct
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