Boss Co. purchased bonds at a discount in the open market as an investment. The bonds will be held in order to collect their contractual cash flows. Boss should account for these bonds at a. Cost. b. Amortized cost. c Fair value through OCI. d. Lower of cost or market.

Boss Co. purchased bonds at a discount in the open market as an investment. The bonds will be held in order to collect their contractual cash flows. Boss should account for these bonds at a. Cost. b. Amortized cost. c Fair value through OCI. d. Lower of cost or market.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 17GI

See similar textbooks

Related questions

Q: The printing costs and legal fees associated with the issuance of bonds should Select one: a. be…

A: As per IFRS 9 and IAS 39, bonds issuance costs shall be accounted for as a reduction from the issue…

Q: nized as a financial asset intended to collect contractual cash flows and also to sell the bonds in…

A: Interest income: Interest income is that the amount paid to an entity for lending its cash or…

Q: none of the choices?

A: IFRS 9-:IFRS 9 is simply an International Financial Reporting Standard circulated by the…

Q: BM Co did not amortize the discount on its short-term bond investment. What effect would this have…

A: A bond when sold at discount, the amount of such discount has to be amortized for its remaining…

Q: Which of the following is not alid statement regarding nds payable? * a. Bonds issued by an entity…

A: Solution: "The amortization of a bond premium increases both the recorded interest expense and…

Q: The process of packaging and/or selling mortgages which are then used to back publicly traded debt…

A: Securitization is defined as the process of converting assets into marketable securities. The main…

Q: Mark buys a financial asset from the DBA. This financial asset is an instrument of short term…

A: Mark buys a financial asset from the DBA. This financial asset is an instrument of short term…

Q: Which of the following is not a valid statement regarding bonds payable? a. Bonds issued by an…

A: Solution: "The amortization of a bond premium increases both the recorded interest expense and…

Q: When the cash proceeds from a bond issued with detachable stock purchase warrants exceed the sum of…

A: The issue of a bond with a detachable warrant includes the issue price of the fair value of the…

Q: The realized gain (loss) on sale of debt investments with an objective of collecting contractual…

A: Realized Gain: When an investment is sold for a greater price than it was originally acquired, this…

Q: Tell whether the following statements describe the characteristics of stocks or bonds. e. Issues of…

A: Stocks are the shares held by owners of the companies. They represent part ownership in the…

Q: All of the following statements regarding available-for-sale debt securities are true, except for…

A: Debt Securities available for sale are recorded at the par value. There is no rule to recognized…

Q: 1. Anton wants to have a portion of ownership of a certain company. Which of the following should he…

A: Hi student Since there are multiple questions, we will answer only first question. There are…

Q: hen the effective cost of d

A: Cost of debts is the effective rate which is given by a company for paying on its debt.

Q: Given that a bond's carrying value is $185,000 and the fair value is $183,000, what is the journal…

A: Bonds are priced by discounting future cash flows. Future cash flows include coupons and par value…

Q: GAAP requires investments in bonds classified as trading securities to be reported at their:

Q: Explain the following types of debt and equity investments with no significant influence: (a)…

A: we will only answer the first three subparts, for the remaining subparts kindlr resubmit the…

Q: The sale of bonds is also referred as: a. Public Finance b. Debt Finance c. Equity Finance d.…

A: The Bonds is a type of a loan. When a company, Government or muncipal corporation is in need of…

Q: One of the primary reasons for investing in debt securities includes a. Deducting interest payments…

A: One of the primary reasons for investing in debt securities includes Earning interest revenue.…

Q: Premiums or discounts associated with available-for-sale debt securities are a. usually not…

A: Answer b. amortized to interest revenue over the life of the investment Accounting standards…

Q: . ABC Corp acquired bonds at a discount and plans to sell these bonds in the near term to take…

A: Bonds are the debt securities issued by company to raise capital for the business. Bonds carries a…

Q: ossible “debt to equity swap” scheme carried out by the client!

A: It means translation of Debt into Equity Capital. It is a refinancing deal to cancel the debt in…

Q: When a company retires bonds early, the gain or loss on the retirement is the differencebetween the…

A: Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing…

Q: Josh Co did not amortize the discount on its short-term bond investment. What effect would this have…

A: The effective interest technique is a bookkeeping practice used to limit a bond. This strategy is…

Q: Which of the following statements regarding bonds is true? Group of answer choices a. Bonds are…

A: Bonds are common fixed income instruments issued by an organization to the investor.

Q: T or F -Under generally accepted accounting principles, gain or loss must be recognized on the…

A: Conversion of Bonds- refers to the issue of equity or preferred stock to the bondholders to settle…

Q: securities on which he is not entailed to get fixed rate of return.

A: Option b is wrong because bonds payable will have fixed rate of return called interest. Option c is…

Q: f the employee has the choice as to whether the settlement is in cash or by issuance of equity…

A: A Compound Financial Instrument is an instrument that has the characteristic of both an equity and…

Q: The use of the effective-interest method to amortize a discount associated with the acquisition of…

A: The effective interest method is used when the bonds are to be amortized or issued at a discount.…

Q: The cash interest payment a corporation makes to its bondholders is based on ________.A. the market…

A: Bondholders is the amount of liability or obligation in form of bonds or debentures of the company.…

Q: nvestment in debt instruments classified as FA@FVTOCI recognizes which of the following in OCI? A.…

A: For debt instruments measured at FVOCI, only the changes in Fair value is recognised in OCI.…

Q: Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a…

A: Definition: Bonds are a kind of interest-bearing notes payable, usually issued by companies,…

Q: When a company uses the the effective-interest method to amortize a bond discount amortization, the…

A: As per effective interest method, there are two ways of recognizing the interest expense. first the…

Q: tion of forward rate is generally used in ______. A. immediate transactions B. previous…

A: Forward contracts are those to be settled on later period and they are not be settled today. They…

Q: Realized gains and losses are recorded on the incomestatement for which of the following…

Q: The secondary market is the market in which: Select one: a. The sale proceeds of a trade flow to the…

A: Definition : In simple words, The secondary marketplace also referred to as the aftermarket, can be…

Q: 1. Trading bond investments are reported at A. Face amount B. Amortized cost C. Maturity value…

A: 1. Trading investments are held-for-trading securities that can generate a profit from the…

Q: Which of the following does not impact the calculation ofthe cash interest payments to be made to…

Q: Which of the following statements concerning bonds is FALSE? A. Bonds can be issued either at par,…

A: Bonds are issued by the corporates as measure to raise funds for the business. unlike shareholders…

Q: Evaluate whether using the cash raised by the rights issue to buy back bonds is likely to be…

A: The answer for the question on using the cash raised by the rights issue to buy back bonds is…

Q: In investment in debt securities accounted for at fair value through other comprehensive income, the…

A: The income statement includes revenues and expenses for the company.

Q: Which of the following statements is correct in regard to trading bond investment? a. Trading bond…

A: Introduction: Trading securities: Buying and selling of any financial securities called as Trading…

Q: Bond premium should be reported in the statement of financial position O at the present value of the…

A: Introduction:- Bond premium means investors are willing to pay more than the face value of the…

Q: ou are required to identify and give reasons for the appropriate classification of the debt…

A: Debt instrument can be defined as the financial instrument which acts as a tool for the business…

Q: Richard would like to invest on long-term debt securities, specifically bonds. Instruct Richard to…

A: The securities are issued by the company in order to fulfill its capital requirements. It helps the…

Question

a. if doing so enhances the qualitative characteristic of
financial information presented in the financial statements.
b. if doing so significantly reduces or eliminates "accounting
mismatch."
c. if it is required by "shadow accounting.
d. at the entity's management's absolute discretion.

4. Boss Co. purchased bonds at a discount in the open market as
an investment. The bonds will be held in order to collect their
contractual cash flows. Boss should account for these bonds at
a. Cost.
c. Fair value through OCI.
d. Lower of cost or market.
b. Amortized cost.
5. According to PFRS 9, on initial recognition, the entity has the
option of designating financial assets to be measured at FVPL

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Classifying Financial Statement Amounts For the following six items, indicate which financial statement category would be affected: (1) net income or (2) other comprehensive income. d. Unrealized loss on a TS debt investment. e. Unrealized gain on an AFS debt investment accounted for using the fair value option. f. Unrealized loss on an equity investment measured at FV-NI.
For each case of a financial asset that is not related to one another, explain (must be accompanied by an explanation) whether meeting the contractual cash flow test consists of only principal and interest: 1) Investments in debt instruments in the form of bonds with a specified maturity date. The bonds have a predetermined principal payment and interest on the principal amount payable is linked to the stock equity index on the stock exchange 2) Investments in debt instruments in the form of bonds from toll road management companies, whose contractual cash flows from these financial assets change according to the number of motorized vehicles that use certain toll roads. 3) Investments in debt instruments with a specified maturity date. A variable interest rate which gives the borrower the option of choosing a market rate of three months LIBOR for three months or one month LIBOR for one month
If a company have a patent and it will not generate probable future economic benefits, in this case the company will: Select one: a. Derecognition. O b. None of the options. c. Not recorded. O d. Record it as an asset
Fair value is used to value which of the following balance sheet accounts? a. Prepaid expenses; patents; property, plant, and equipment b. Capital lease obligations, bonds payable c. Receivables net of allowance for doubtful accounts d. Debtsecurities available for sale, trading securities
1. More than one measurement bases apply to investments in debt securities and investment in equity under PFRS 9. What are these measurement bases?2. Identify critical questions to be asked in applying PFRS 9 in the measurement of financial assets.3. How would you distinguish an equity instrument from a debt instrument?
1. Investments in debt securities are classified for accounting purposes as: A. Financial asset at amortized cost (AC), fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVPL) B. Financial asset at amortized cost (AC) or fair value through other comprehensive income (FVOCI) only C. Trading, Available-for-Sale (AFS) or Held-to-Maturity (HTM) D. Available-for-Sale (AFS) or Held-to-Maturity (HTM) only
1. Assuming that the company’s business model has an objective of holding the debt securities to collect contractual cash flows, what is the realized gain on sale of the Yankee bonds in 2021? 2. Assuming that the company's business model has an objective of holding debt securitiees to collect contractual cash flows, what is the total unrealized holding gain/loss to be reported in the profit/loss for 2021?
1. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much unrealized gain (loss) is to be reflected in the statement of changes in equity and statement of comprehensive income at yearend 2020? 2. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: What is the carrying value of the investment on December 31, 2020? 3. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: Determine the gain or (loss) to be recorded upon the sale of the investment.
____ 18. The acquisition of an asset on creditA) leaves the total assets unchangedB) decreases assets and increases liabilitiesC) increases assets and liabilitiesD) increases assets and owner’s equity____ 19. The account records long-term debt of thebusiness entity for which it has pledged certainassets as securityA) notes payableB) accounts payableC) mortgage payableD) bonds payable____ 20. The accounting equationA) is used to determine the amount of liabilities owedB) is used to determine the amount of income earnedduring the periodC) shows the claims on the owner’s equity by thecreditorsD) shows the claims on the entity’s assets by both thecreditors and the owner____ 21. When the proprietor withdraws cash or otherassets, the withdrawal account isA) debitedB) creditedC) debited and creditedD) not affected____ 22. A credit entry decreases the balance ofA) owner’s equityB) assetsC) incomeD) liabilities____ 23. When an entity pays employees for theirservices, the effect is an increase…
15. The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) deduction from net income. investing activity. addition to net income. financing activity.
In investment in debt securities accounted for at fair value through other comprehensive income, the difference between the fair value and the accumulated unrealized gain or loss - OCI presented in the statement of financial position would normally equal to: * A. The unrealized gain or loss - OCI presented as part of other comprehensive income B. The amortized cost of the debt securities C. The interest income for the period D. The fair value of the debt securities in the previous period
When bonds and other debt securities are issued, payments such as legal costs, printing costs, and underwriting fees, are referred to as debt issuance costs (called transaction costs under IFRS). If Rushing International prepares its financial statements using IFRS: a. the recorded amount of the debt is increased by the transaction costs. b. the decrease in the effective interest rate caused by the transaction costs is reflected in the interest expense. c. the transaction costs are recorded separately as an asset. d. the increase in the effective interest rate caused by the transaction costs is reflected in the interest expense.