Use the following information for questions 74 and 75.
Landis Company purchased $2,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2014, with interest payable on July 1 and January 1. The bonds sold for $2,083,160 at an effective interest rate of 7%. Using the effective-interest method, Landis Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums of $7,080 and $7,320, respectively.
-At December 31, 2014, the fair value of the Ritter, Inc. bonds was $2,120,000. What should Landis Company report as other comprehensive income and as a separate component of stockholders' equity?

Question

Quizplus · Accepted Answer

The amortized premiums for the year are ($7,080 + $7,320) = $14,400. 
The fair value adjustment is calculated as: 
Fair Value Adjustment = Fair Value - Carrying Value 
= $2,120,000 - ($2,000,000 + $14,400) 
= $105,600 
Thus, the other comprehensive income is $105,600 - $14,400 = $91,200. 
This amount is reported as a separate component of stockholders' equity. 
Therefore, the correct answer is A.

Use the Following Information for Questions 74 and 75