On january 1, year 2, southern corporation received $107,720 for a $100,000 face amount, 12% bond, a price that yields 10%. the bonds pay interest semiannually. southern elects the fair value option for valuing its financial liabilities. on december 31, year 2, the fair value of the bond is determined to be $106,460. southern recognized interest expense of $12,000 in its year 2 income statement. what was the gain or loss recognized on the year 2 income statement to report this bond at fair value?
a) $12,000 lossb) $1,260 gainc) $13,260 lossd) $6,460 gain

Xinhong company is considering replacing one of its manufacturing machines. the machine has a book value of $39,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. it has a current market value of $49,000. variable manufacturing costs are $33,300 per year for this machine. information on two alternative replacement machines follows. alternative a alternative b cost $ 115,000 $ 117,000 variable manufacturing costs per year 22,900 10,100 1. calculate the total change in net income if alternative a and b is adopted. 2. should xinhong keep or replace its manufacturing machine