Bond Entries—Investor
On June 1, 2007, Sunderland Inc. purchased as a long term investment 400 of the $1,000 face value, 8% bonds of Stateline Corporation for $364,547. The bonds were purchased to yield 10% interest. Interest is payable semiannually on December 1 and June 1. The bonds mature on June 1, 2013. Sunderland uses the effective interest method of amortization. On November 1, 2008, Sunderland sold the bonds for $392,500. This amount includes the appropriate accrued interest. Sunderland intended to hold these bonds until they matured, so year to year market value fluctuations were ignored in accounting for the bonds.
Instructions: Prepare a schedule showing the income or loss before income taxes from the bond investment that Sunderland should record for the years ended December 31, 2007, and 2008.