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- Mercer Corporation acquired $400,000 of Park Company’s bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semiannually on June 30 and December 31. The appropriate market interest rate is 11%, and the bonds are due June 30, 2021. Required: 1. Prepare an investment interest income and premium amortization schedule, using the: a. straight-line method b. effective interest method 2. Prepare journal entries to record the December 31, 2018, and December 31, 2020, interest receipts using both methods.On January 1, 2021, Kaye Ltd. purchased $250,000 of Danford Co.'s 4%, 8-year bonds. The market rate was 5%, and Kaye purchased the bonds for $233,681. The bonds pay interest semi-annually, on June 30 and December 31. Kaye uses the amortized cost model and the effective-interest method to recognize interest income on bond investments. Rounding values to the nearest dollar (if necessary), the entry to recognize receipt of the December 31, 2021 interest payment will include: Question 1 options: DR Cash $5,863 DR Cash $5,842 CR Interest income $5,842 CR Interest income $5,863Example 2) Fair value through profit or loss: Debt investment ABC Co. had the following transactions pertaining its trading investments: Feb. 1, 2021 Purchased $200,000 of 3-year, 6% bonds at 104. Interest is payable on each August 1 and February 1. Aug. 1, 2021 Received interest on the bonds. Dec. 31, 2021 The fair value of the bonds was 100. Instruction: Record the above transactions, using the fair value through profit or loss model. Also, prepare any required adjusting entry/entries at December 31, 2021. ABC Co. has a December 31 year-end.
- General Investment Co. (GIC) purchased bonds on January 1, 2021. GIC's accountant has projected the following amortization schedule from purchase until maturity: Date Cash Received Interest Revenue Amortization of Discount Amortized Cost 1/1/2021 $ 194,758 6/30/2021 $ 7,000 $ 7,790 $ 790 195,548 12/31/2021 7,000 7,822 822 196,370 6/30/2022 7,000 7,855 855 197,225 12/31/2022 7,000 7,889 889 198,114 6/30/2023 7,000 7,925 925 199,039 12/31/2023 7,000 7,961 961 200,000 1. At a discount. 2. At par. 3. Cannot be determined from the given information.…uses the effective interest method of amortization. In its December 31, 2003 balance sheet, what amount should York report as investment in bonds? a. 911,300 b. 916,600 c. 953,300 d. 960,600 (AICPA) Use the following information for the next three questions: On Jan. 1, 20x1, Koong Co. acquired 100, P5,000 face amount, 10%, 3-year 'term' bonds of King Co. for P428,567. Koong incurred transaction costs of P25,000 on the acquisition. The effective interest rate adjusted for the transaction costs is 14%. The bonds were quoted at 102 on Dec. 31, 20x2. 2. How much are the interest income in 20x2 and the carrying amount of the bonds on Dec. 31, 20x2 if the bonds are held under a “hold to collect" business model? a. 65,389; 482,455 b. 65,389; 510,000 c. 55,276; 472,834 d. 50,000; 453,567 3. How much are the interest income in 20x2 and the carrying amount of the bonds on Dec. 31, 20x2 if the bonds are held under a “hold to collect and sell" business model? a. 65,389; 482,455 c. 50,000; 428,567…Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2019. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12%, and are due January 1, 2022. Required: 1. Prepare an investment interest income and discount amortization schedule using the: a. straight-line method b. effective interest method 2. Prepare the July 1, 2021, journal entries to record the interest income under both methods.
- Fox Co. purchases land on January 1 of Year 1 and issues a 3-year, $70,000 zero-interest-bearing note as payment. The market rate is 10%, and Fox Co. uses the effective interest method to amortize discounts and premiums. Required Stated Interest = 0% e. Repeat the requirements of parts a, b, and c with the stated interest on the note as 5%. e. (part a: prepare a debt amortization schedule for the note) • Note: Round your answers to the nearest whole dollar. Do not use negative signs with your answers. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 Dec. 31, Year 3 Stated Rate = 5% $ Cash 3,500 $ 3,500✔ 3,500 ✓ 10,500 $ Interest Expense Discount Amortization 7,000 * $ 7,000 x 7,000 X 21,000 $ 0x 7,000 x 1,167 X 8,167 Note Payable, Net 50,937 x 0x 0 x 1,167 $ e. (Part b: prepare the entry for issuance of the note in exchange for land on January 1 of Year 1)Cullumber Company purchased bonds with a face amount of $725000 between interest payment dates. Cullumber purchased the bonds at 102, paid brokerage costs of $13900, and paid accrued interest for three months of $23900. The amount to record as the cost of this long-term investment in bonds is $739500. $725000. $753400. $777300.On January 1, 2020, Andrea Company purchased bonds with face value of P8,000,000 for P7,679,000. The stated rate on the bonds is 10% but the bonds are acquired to yield 12%. The bonds mature at the rate of P2,000,000 annually every December 31 and the interest is payable annually also every December 31. The entity uss the effective interest method for amortizing discount. What is the carrying amount of the investment at year-ended December 31, 2021? (Round off to the nearest whole number)
- Wildhorse Company purchased bonds with a face amount of $1225000 between interest payment dates. Wildhorse purchased the bonds at 101, paid brokerage costs of $15900, and paid accrued interest for three months of $25900. The amount to record as the cost of this long-term investment in bonds is $1253150. $1237250. $1225000. $1279050.Yale Co. purchased a bond on October 4 of the current year for $45,000 and classified it as available-for-sale. The market value of the investment at year-end is $42,000. What value will be reported in net income for the adjustment, if any? a. $42,000 b. $0 c. $(3,000) d. Not enough information is given to determine the amount included in net income.On January 1, 2022, Isabel Company purchased bonds with face amount of P8,000,000 for P7,679,000 to be held to maturity. The stated rate on the bonds is 10% but the bonds are acquired to yield 12%. The bonds mature at the rate of P2,000,000 annually every December 31 and the interest is payable annually also every December 31. The entity used the effective interest method of amortizing discount. What is the carrying amount of the bond investment on December 31, 2022? A. 5,759,250 B. 7,759,250 C. 7,800,480 D. 5,800,480