Baggs buys $100,000 of Vista Company bonds on January 1, 2016 at face value.The bonds pay 10% interest semiannually on June 30 and December 31.If Baggs sells the bonds at 99 on July 1, 2016, there will be a loss reported on the income statement.

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If Baggs sells the bonds at 99 on July 1, 2016, the selling price would be $99,000 ($100,000 x 0.99). This means that Baggs would incur a loss of $1,000 ($100,000 - $99,000) when compared to the face value of the bond. Since the loss would impact the income statement, the statement would report a loss.

Baggs Buys $100,000 of Vista Company Bonds on January 1