What is the interest income on the bond investment for the year 2022? What is the carrying amount of the bond investment on December 31, 2022? Situation 1 An entity included the following investments at cost and fair value:CostFair value – 12/31/2020Fair value – 12/31/2021Bond investment4,000,0002,800,0003,600,000Share investment7,000,0007,400,0008,000,000The business model for the bond investment is to collect contractual cash flows composed of principal andinterest, and sell the asset. The bonds were purchased at face amount of P4,000,000.The ordinary shares are nontrading and the entity elected to present fair value changes in other comprehensiveincome. On January 1, 2022, the entity sold the bonds and share for P5.000.000 and P9,000,000 respectively.Situation 2 On January 1 2020, an entity purchased 9% bonds in the face amount of P3,000,000 forP2,776,000 to yield 11%. The bonds mature on January 1 2025.The entity classified the bonds as held for trading and interest is payable annually every December 31. Thepair value of the bonds and effective rate were:Fair ValueEffective RateDecember 31, 20202,758,00012%December 31, 20213,078,0008%On December 31, 2021, the entity changed its business model for this investment to collecting contractualcash flows composed of principal and interest. On January 1. 2022, the fair value of the bonds was the sameas of December 31, 2021.

Interest Income: The revenue you have from a bond investment, the interest payments made by its…

Answered: What is the interest income on the bond…

What is the interest income on the bond investment for the year 2022? What is the carrying amount of the bond investment on December 31, 2022?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: How much is the price of a P 100, 000.00 bond that pays a dividend of semi-annually redeemable at…

A: A bond is a fixed-income security that reflects an investor's debt to a borrower (typically…

Q: What is the amount of bond interest expense for the first year?

A: Solution: Bond interest expense for first year = Interest expense for first semiannual period +…

Q: A $1000 par value bond is quoted as 6 5/8 2028. The bondholder w year. O $61.20 O $60.63 O $66.25

A: The bonds are very safe and secured types of investment in which there are annual interest payment…

Q: On July 1, 2023, Sheffield Aggregates Ltd. purchased 7% bonds with a maturity value of $135,000 for…

A: Journal entry is the initial record of the transactions in the books of accounts it includes at…

Q: According to the theory, premium bonds, discount bonds, and face value bonds at the expiry date will…

A: Bonds refer to borrowing security issued by the company to raise funds from the market by making an…

Q: Required: Part 1 Record the following entries: (Do not round intermediate calculations. Round the…

A: Bond is a security issued by the company to raise finance in the company.It is a fixed interest…

Q: A taxpayer who purchase a series EE US savings bond must report the interest income increase in…

A: The taxpayer can report income from the savings bond either every year or at the time of maturity,…

Q: Prepare a bond amortization schedule up to and including January 1, 2028, using the…

A: Please find the bond amortization schedule in step 2 below.

Q: On January 1, 2021, PRANCER Company was authorized to issue 12% bonds with a face amount of…

A: A bond is an instrument that was issued by the federal authority which was used by the companies to…

Q: White & Decker Corporation's 2024 financial statements included the following information in the…

A: Step 1:1)Face value = $590 millionTerm = 20 yearsCarrying value = $401 million in 2024 (15 years to…

Q: On February I, 2019, Osborn pie sold 12% bonds having a maturity value of $800,000. The bond yields…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts…

Q: A bond is issued on December 22, 2005 and is scheduled to mature on December 22, 2020. What is this…

A: Years to maturity is the difference between the date today and maturity date

Q: A 12% Pl face value bond with interest payable June 30 and December 31, which matures on June 30,…

A: Total cash received by June 30, 2022 = Redemption value of the bonds + Semi-annual interest on the…

Q: Calculate the quoted price on June 1, 2011 of the bond outlined below. (Assume that the face value…

A: Given: Particulars Amount Face value $100 Coupon rate 5.0% Market rate 5.80% Maturity…

Q: Reporting Bonds Using the Fair Value Option Mitchell Inc. issued 24, 6%, $1,000 bonds on January 1,…

A: Introduction:A journal entry is a record of a business arrangement in the accounting system of a…

Q: Which of the following is true of the Premium on Bonds Payable account? (The bonds are due in ten…

A: Option 4 is the appropriate choice.

Q: Which of the following debt should be classified as a current liability on December 31, 2020 in the…

A: A current liability is a debt or obligation that a business must pay off within a year, or during…

Q: Suppose that at the end of 2019 the following term structure of interest rates for securities was…

A: The computation is done as shown:

Q: Required information [The following information applies to the questions displayed below.] On…

A: The bonds can be issued at a discount or premium. The bonds are issued at a price below the face…

Q: 1a) What was the issue price on January 1 of this year? 1b) What amount of interest expense should…

A: Price of bond is the present value of coupon payment and present value of par value of bond taken on…

Q: How much is the amount attributable to the principal portion of the note on the payment made on…

A: Principal portion means the amount of instalment that is not attributable to the interest portion.

Q: Define liabilities. Provide three examples.

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: When the interest payment dates of a bond are May 1 and November 1, and a bond is purchased on June…

A: Interest is the term which is defined as the monetary charge for borrowing the money usually…

Q: On February 1, 2023, what was the value of a P7,000, bond with 5% compounded semiannually due on…

A: Here,

Q: Date 1/1/2024 /30/2024 $11,500 11,500 11,500 11,500 11,500 11,500 31/2024 30/2025 31/2025 30/2026…

A: Bonds are source of finance for companies and bonds pay an annual interest rate and par value is…

Q: On January 1, 2021, Tennessee Harvester Corporation issued debenture bonds that pay Interest…

A: Bond :— It is one of the source of capital that pays periodic interest and principal amount at the…

Q: White & Decker Corporation's 2024 financial statements included the following information in the…

A: Effective interest rate refers to the rate which is charged on the investment amount after…

Q: please answer in detail with all work thanks The company X acquired a bond on 1/1/2022 AND with a…

A: Bond is that debt instrument which is used by the organisation to finance its long term fund…

Q: A bond issued by IBM on December 1, 1996, is scheduled to mature on December 1, 2096. If today is…

A: The time to maturity of a bond is the length of time until the bond reaches its maturity date, at…

Q: A bond issued by Ford on May 15, 1997 is scheduled to mature on May 15, 2097. If today is November…

A: The remaining time until the bond matures or expires is referred to as the time to maturity.

Q: Bonds that may be redeemed prior to maturity at the option of the issuer are called a. early…

A: Bonds are fixed-income securities representing a loan made by an investor to a borrower, typically a…

Q: What would be the value of this bond if it paid interest semiannually? was missed ?

A: Price of bond is the present value of coupon payment and present value of par value of bond taken on…

Q: A comapny has issued a $162, 000, 3 year, zero interest bond dated January 1, 2023. The market…

A: Bonds -Governments and businesses can raise money by issuing bonds, which are fixed-income…

Q: Assume that on May 1, 2022, Austin Company issues, at 106 plus accrued interest, 10-year bonds with…

A: The accrued interest is the short term or current liability for the business. It reported in the…

Q: 2. What total amount should be reported as current liabilities on December 31, 2021? Sunflower…

A: Current liabilities are short-term obligations of the company. Those obligations which are to be…

Q: Please answer following true or false with explanation i am providing 3 subparts (A) A bond was…

A: Bond is the debt to the company who has issued it, this is the instrument which is issued to the…

Q: On January 1, 2021, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a…

A: Particulars Values Face value of the bond (100*$1,000) $ 1,00,000.00 Current price of the bond…

Q: White & Decker Corporation's 2024 financial statements included the following information in the…

A: Future value (FV)$630 millionPresent value (PV)$321 millionNumber of years, n15 Years

Q: b) A bond was issued on 1 July 2018. Below is the timeline of all cash flows payable by the bond…

A: A bond is a debt instrument that provides periodic interest to the owner and the face value at…

Q: CCI Inc. has a 9.85% bond that mature on March 15, 2034. Assume that the interest on these bonds is…

A: The objective of this question is to calculate the price of a bond as of March 15, 2024, given the…

Q: When determining the amount of interest to be paid on a bond, which of the following information is…

A: The correct answer is: (D) The selling price of the bonds The selling price of the bonds is not…

Q: What is the typical relationship among interest rates onthree-month Treasury bills, long-term…

A: Treasury bills are governmental securities which are risk-free whether issued for short term or long…

Q: to view the bond listing from the table below. the close of the selling day of the bond BUD.ID is a…

A: Bond:A bond is a debt instrument issued by the firm for raising debt capital from…

Q: BOND PRICING #2 for Borrowing Money Inc Borrowing Money Inc (BMI) issues a bond on January 1, 2021…

A: Bond is borrowing security that is issued by the company to raise funds from the market by making an…

Q: For a standard U.S. Treasury bond, when are the following characteristics of the bond determined?…

A: The question is asking about the timing of when various characteristics of a standard corporate bond…

Question

What is the interest income on the bond investment for the year 2022?

What is the carrying amount of the bond investment on December 31, 2022?

Situation 1 An entity included the following investments at cost and fair value:
Cost
Fair value – 12/31/2020
Fair value – 12/31/2021
Bond investment
4,000,000
2,800,000
3,600,000
Share investment
7,000,000
7,400,000
8,000,000
The business model for the bond investment is to collect contractual cash flows composed of principal and
interest, and sell the asset. The bonds were purchased at face amount of P4,000,000.
The ordinary shares are nontrading and the entity elected to present fair value changes in other comprehensive
income. On January 1, 2022, the entity sold the bonds and share for P5.000.000 and P9,000,000 respectively.
Situation 2 On January 1 2020, an entity purchased 9% bonds in the face amount of P3,000,000 for
P2,776,000 to yield 11%. The bonds mature on January 1 2025.
The entity classified the bonds as held for trading and interest is payable annually every December 31. The
pair value of the bonds and effective rate were:
Fair Value
Effective Rate
December 31, 2020
2,758,000
12%
December 31, 2021
3,078,000
8%
On December 31, 2021, the entity changed its business model for this investment to collecting contractual
cash flows composed of principal and interest. On January 1. 2022, the fair value of the bonds was the same
as of December 31, 2021.

Expert Solution

This question has been solved!

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

SEE SOLUTION Check out a sample Q&A here

Step 1: Define of Interest Income & Carrying Amount

VIEW

Step 2: Calculate Interest Income in Situation 1:

VIEW

Step 3: Calculate the Carrying Amount

VIEW

Solution

VIEW

Step by step

Solved in 4 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

Sheridan Inc. is building a new hockey arena at a cost of $2,150,000. It received a down payment of $430,000 from local businesses to support the project, and now needs to borrow $1,720,000 to complete the project. It therefore decides to issue $1,720,000 of 10- year, 10.5% bonds. These bonds were issued on January 1, 2023, and pay interest annually on each January 1. The bonds yield 10.5% to the investor and have an effective interest rate to the issuer of 10.40530%. (There is an increased effective interest rate due to the capitalization of the bond issue costs.) Any additional funds that are needed to complete the project will be obtained from local businesses. Sheridan paid and capitalized $43,000 in bond issuance costs related to the bond issue. Sheridan prepares financial statements in accordance with IFRS.
3. Prepare the journal entries to record the issuance of the bonds by Sanyal and Barnwell’s investment on February 1, 2024. 4. Prepare the journal entries by both firms to record all events related to the bonds through January 31, 2026. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Prepare a schedule of interest expense and bond amortization for 2025-2027. (Round answer to 2 decimal places, e.g. 38,548.25.) Date 1/1/25 $ 12/31/25 12/31/26 12/31/27 Cash Paid Schedule of Interest Expense and Bond Premium Amortization Effective-Interest Method $ Interest Expense $ Premium Amortized $ Carry Value of
Show the complete solution
answer in text form please (without image
Martel Industries issues a bond on June 1, 2020, that will mature on June 1, 2040. Martel stipulates that bondholders may sell their bonds back to Martel after 5 years (on June 1, 2025) at 100% of par. This is an example of what type of bond offering? O Secured O Putable O Callable O Convertible
1. what is the interest expense recognized for the year 2021? 2. what is the share premium to be recognized in relation to the conversion of the convertible bonds?
Gadubhai
A 15000 Manulife Financial Corporation bond bearing interest at 5.66% payable semi-annually is redeemable at par on March 12,2028. The bond is sold on the primary market on January 5,2021, to yield 6.42% compounded semi-annually. a) Calculate the purchased price.(use Bond key) b) The accrued interest
A $10 000 bond with 5% interest payable quarterly, redeemable at par on November 15, 2034, was bought on July 2, 2018, to yield 9% compounded quarterly. If the bond sells at 92.75 on September 10, 2024, what would the gain or loss on the sale be? Show manual working.
The bonds mature on December 31, 2033 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1, 2024. 2. to 4. Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2024, interest on June 30, 2024 (at the effective rate) and interest on December 31, 2024 (at the effective rate). Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Determine the price of the bonds at January 1, 2024. Note: Enter your answer in whole dollars. Price of bonds
Moon Corporation acquired bonds with a face value of P3,000,000 for P2,800,000 on January 1, 2020. The bond has a stated interest of 10%, pays interest every December 31, and matures on December 31, 2022. Requirements: Prepare the necessary journal entries to record the above How much is the investment in bonds on December 31, 2020? Assuming that the bond is a serial bond and the P1,000,000 matures every December 31. Prepare the journal entries to record the The same information in No. 3, how much is the investment in bonds on December 31, 2020?