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On January 1, 2012, Brock Company purchased $200,000, 8% bonds of Universal Co. at par. Interest is payable annually on December 31. The bonds mature in five years on December 31, 2016.
Required
a. At the date of purchase at what amount should Brock record the bond investment?
b. Determine the amount of cash interest Brock would receive in 2012.
c. At December 31, 2012 the bonds have a fair market value of $203,500 how will this information affect Brock’s financial statements given that the bonds are classified as:
1. Held-to-Maturity
2. Trading
3. Available for Sale
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