On July 1, Year 1, ABC Corp purchased 5.50% bonds having a maturity value of $100,000 for
Question:
On July 1, Year 1, ABC Corp purchased 5.50% bonds having a maturity value of $100,000 for $103,859. The bonds provide the bondholders with a 4.49% yield. Interest is received on June 30 and December 31 of each year. The company uses the effective interest method to allocate unamortized discounts or premiums and has a December 31 year-end. The bonds are accounted for using the FV-OCI model with recycling. The fair value of the bonds on December 31, Year 1, and December 31, Year 2, was $103,675 and $102,485, respectively. Assume fair value adjustments are recorded at year-end only. Immediately after collecting interest on December 31, Year 2, the bonds were sold for their fair value. How much-unrealized gain or loss was recorded under OCI on December 31, Year 1, for this investment?
