Muir, Ltd. measures its trading securities at fair value. It has liabilities that it also measures using the fair value option. Muir has bonds outstanding (originally sold for $4,320,000) in the face amount of $3,600,000 with a current bond premium of $612,000. The bonds were selling at 101 on the market at its year end. If the company elects the fair value option for these bonds, at what value should it report for these bonds on its balance sheet at year end?
A) $3,636,000
B) $3,960,000
C) $4,212,000
D) $4,320,000

Question

Quizplus · Accepted Answer

The fair value of the bonds is calculated as 101% of the face amount, which is $3,600,000 * 1.01 = $3,636,000.

Muir, Ltd Measures Its Trading Securities at Fair Value