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In 2019, Osgood Corporation purchased $8.1 million worth of 10-year municipal bonds at face value. On December 31, 2021, the bonds had a fair value of $3,400,000 and Osgood reclassified the bonds from held-to-maturity to trading securities. Osgood's December 31, 2021, balance sheet and the 2021 income statement would show the following: Investment in bonds (TS) Income statement loss on investments a. $ 3,400,000 $ 0 b. $ 3,400,000 $ 4,700,000 c. $ 8,100,000 $ 4,700,000 d. $ 8,100,000 $ 0

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Answer:

Osgood Corporation

Osgood's December 31, 2021, balance sheet and the 2021 income statement would show the following: Investment in bonds (TS) Income statement loss on investments:

b. $ 3,400,000 $ 4,700,000.

Explanation:

a) Data and Calculations:

2019: Face value of 10-year municipal bonds = $8.1 million

December 31, 2021, Fair value of the municipal bonds = $3.4 million

There is a loss in value amounting = $4.7 million ($8.1 - $3.4)

In the balance sheet, the municipal bonds will stated at its fair value of $3.4 million while in the income statement, there will be a loss on investments of $4.7 million.

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