Crawford Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has risen. Crawford elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year? Multiple Choice Interest expense and a gain. Interest expense and a loss. A gain and no interest expense. Interest expense and no gain or loss.

Interest expense and a gain.

Explanation:

US GAAP allows companies to report their financial assets or financial liabilities at their fair market value, this is called the fair value option.

If interest rates increase, and of course the coupon rate is fixed, then they value of bonds will decrease. The same logic applies to bonds sold at a discount.

In this case, the company must report an interest expense in the income statement regardless of what happens to the interest rate, since the company must pay the coupon rate.

Since the price of the bonds decreased, then the company's liabilities (bonds payable) decrease, so the company must report a gain = bond's previous value - bond's current value

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.