Pat Inc. purchased the $100.000 face value outstanding bonds of Slinger Company, its 80%-owned subsidiary, fo$101.300 (to yield 7.5% annual interest) on January 1, 20X3. The bonds have a stated nominal interest rate of 8°.The bonds were sold on January 1, 20X1, for $101,005 to yield 7.75% annual interest. The bonds mature on Janu20X6. The bonds pay interest each January 1. Amortizations of premiums are done using the effective interest"amortization method.Instructions:1. Prepare the 5-year amortization schedule for the bonds issued by Slinger.7.75% Interest2.3.4.Date1/1/X11/1/X21/1/X31/1/X41/1/X51/1/X6Payment8,0008,0008,0008,0008,000Prepare the 3-year amortization schedule for the bonds purchased by Pat Inc.DatePayment7.5% Interest1/1/X31/1/X4Amortization1/1/X51/1/X6Amortization8,0008,0008,000Record the entries made by Slinger in 20X3 relative to the bonds.Record the entries made by Pat Inc. in 20X3 relative to the bonds.Balance101,005Balance101.300

Given in the question: Face Value of Bonds $1,00,000 Nominal Interest Rate 8%…

1. Prepare the 5-year amortization schedule for the bonds issued by Slinger. Payment 7.75% Interest Amortization 4. Date 1/1/X1 1/1/X2 1/1/X3 1/1/X4 1/1/X5 1/1/X6 8,000 8,000 8,000 8,000 8,000 Prepare the 3-year amortization schedule for the bonds purchased by Pat Inc. Date Payment 7.5% Interest. 1/1/X3 1/1/X4 1/1/X5 1/1/X6 Amortization 8,000 8,000 8,000 3. Record the entries made by Slinger in 20X3 relative to the bonds. Record the entries made by Pat Inc. in 20X3 relative to the bonds. Balance 101,005 Balance 101.300

1. Prepare the 5-year amortization schedule for the bonds issued by Slinger. Payment 7.75% Interest Amortization 4. Date 1/1/X1 1/1/X2 1/1/X3 1/1/X4 1/1/X5 1/1/X6 8,000 8,000 8,000 8,000 8,000 Prepare the 3-year amortization schedule for the bonds purchased by Pat Inc. Date Payment 7.5% Interest. 1/1/X3 1/1/X4 1/1/X5 1/1/X6 Amortization 8,000 8,000 8,000 3. Record the entries made by Slinger in 20X3 relative to the bonds. Record the entries made by Pat Inc. in 20X3 relative to the bonds. Balance 101,005 Balance 101.300

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 5E

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On May 1, 20X1, Starlight Company purchased $750,000 of Gazing Corp's 12% bonds at 100 plus accrued interest. On December 31, 20X1, Starlight Co. received its annual interest. On March 31, 20X3, Starlight decided to sell half the bonds to Twinkly Inc. at 99 plus accrued interest. Prepare the journal entries for the following transactions: a. The purchase of the bonds b. The receipt of all interest c. The sale of the bonds to Twinkly Inc.
On January 1, Year 1, Grow Company purchased P 1,000,000, 12% bonds of Glow Company for P 1,063,394, a price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on December 31, Year 4. On April 1, Year 3, to pay a maturing obligation, Grow sold P 600,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows: December 31, Year 1 108 December 31, Year 2 106 December 31, Year 3 104 Assume that the company intended to collect principal and interest over the term of the bonds and did not choose the fair value option, At what amount should the bond investments be shown on December 31, Year 2 statement of financial position? What amount of gain or loss should Grow recognize on the sale of investments in April 1, Year 3? What amount of interest income will be taken to profit or loss for the year ended December 31, Year 3?
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On January 1, Year 1, Grow Company purchased P1,000,000 12% bonds of Glow Company for P1,063,394, a price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on December 31, Year 4. On April 1, Year 3, to pay a maturing obligation, Grow sold P600,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows: December 31, Year 1 108 December 31, Year 2 106 December 31, Year 3 104 Required: Assume that the bonds were classified as debt investments at fair value through profit or loss. a) How much is interest income for the year ended December 31, Year 1? b) What amount of gain or loss should Grow report on the sale of the bond investments on April 1, Year 3? c) At what amount should the bond investments be shown on December 31, Year 2 and…
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