Presented below is selected information related to the financial instruments of Dawson Company at December 31, 2014. This is Dawson Company’s first ye
Presented below is selected information related to the financial instruments of Dawson Company at December 31, 2014. This is Dawson Company’s first year of operations.
\r\nCarrying Fair Value
\r\nAmount (at December 31)
\r\nInvestment in debt securities (intent is to hold to maturity) $ 40,000 $ 41,000
\r\nInvestment in Chen Company stock 800,000 910,000
\r\nBonds payable 220,000 195,000
\r\nInstructions
\r\n(a) Dawson elects to use the fair value option whenever possible. Assuming that Dawson’s net income is $100,000 in 2014 before reporting any securities gains or losses, determine Dawson’s net income for 2014.
\r\n(b) Record the journal entry, if any, necessary at December 31, 2014, to record the fair value option for the bonds payable.