3) Daniel purchased a bond on July 1, 2020, at par of $10,000 plus accrued interest...

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3) Daniel purchased a bond on July 1, 2020, at par of $10,000 plus accrued interest of $300. On December 31, 2020, Daniel col

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Answer 1

Answer #1

Answer: OPTION A- Daniel must recognize $300 interest income for 2020 and $200 gain on the sale of bond in 2021.

Interest Income for 2020 = Interest collected during the year - Accrued interest at the time of purchase of bond

=$600-$300

=$300

Gain on sale of bond on January1, 2021= Selling price of the bond- Purchase price of the bond

=$10,200-$10,000

=$200

Thus, option A is the correct choice.

The interest income for 2020 is $300 not $600, hence, option B and C are the incorrect choices.

Also, there was a gain of $200 on sale of bond, not loss, hence, option D is also incorrect.

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Answer 2

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