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In: Accounting

On January 1, 2019, the Pebbles Company acquired a Bam-Bam Business bond investment with a principal...

On January 1, 2019, the Pebbles Company acquired a Bam-Bam Business bond investment with a principal of $ 100,000 for $ 90,000. Pebbles classified the investment as Held to Maturity. The bonds mature in 5 years and pay interest annually at 10%. Pebbles uses the indirect method to prepare the Statement of Cash Flows.
Assuming that, in 2019, Pebbles forgot to amortize the investment discount on Bam-Bam Bonds, what is the impact of this error on net income and on net operating cash flow of 2019 if it is not discovered timely and not taken into account when preparing the financial statements?
 
Net Income
Net Cash Flow from
Operational Activities

Select one:
to. Overrated None
b. Underrated None
c. Underestimated Underestimated
d. Underestimated Underestimated

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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