Chee purchases Tan, Inc. bonds for $108,000 on January 2, 2017. The face value of the bonds

Question:

Chee purchases Tan, Inc. bonds for $108,000 on January 2, 2017. The face value of the bonds is $100,000; the maturity date is December 31, 2021; and the annual interest rate is 5%. Chee will amortize the premium only if he is required to do so. Chee sells the bonds on July 1, 2019, for $106,000.

a. Determine the interest income Chee should report for 2017.
b. Calculate Chee’s recognized gain or loss on the sale of the bonds in 2019.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...