On July 1, 2005, Knudsen purchased 13-year, 7% bonds having maturity a value of $448,000. Interest is paid semi-annually on June 30 and December 31 and the bonds provide the bondholders a 15% yield. Knudsen uses the effective-interest method to amortize discount or premium. At the time of acquisition, the bonds were classified as held-to-maturity. The fair value of the bonds on December 31, 2011 is $433,000. The fair value of the bonds as of December 31 of the immediately preceding year (prior measurement date) was $497,000. 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 rating: 100% (QA)

Principal Amount of Bonds 448000 Stated Interest Rate 0035 Effective Market Int... View the full answer