Appling Enterprises issued 9% bonds with a face amount of $410,000 on January 1, 2018. The bonds sold for $374,824 and mature in 2037 (20 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Appling determines interest expense at the effective rate. Appling elected the option to report these bonds at their fair value. The fair values of the bonds at the end of each quarter during 2018 as determined by their market values in the over-the- counter market were the following: March 31 June 30 September 30 December 31 $400,000 385,000 378,000 385,000 General (risk-free) interest rates did not change during 2018. Required: 1. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the March 31 quarterly financial statements? 2. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the June 30 quarterly financial statements? 3. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the September 30 quarterly financial statements? 4.By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? (For all requirements. Do not round your intermediate calculations.)
Appling Enterprises issued 9% bonds with a face amount of $410,000 on January 1, 2018. The bonds sold for $374,824 and mature in 2037 (20 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Appling determines interest expense at the effective rate. Appling elected the option to report these bonds at their fair value. The fair values of the bonds at the end of each quarter during 2018 as determined by their market values in the over-the- counter market were the following: March 31 June 30 September 30 December 31 $400,000 385,000 378,000 385,000 General (risk-free) interest rates did not change during 2018. Required: 1. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the March 31 quarterly financial statements? 2. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the June 30 quarterly financial statements? 3. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the September 30 quarterly financial statements? 4.By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? (For all requirements. Do not round your intermediate calculations.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:income will be
1. Appling's comprehensive
2. Appling's comprehensive
income will be
3. Appling's comprehensive income will be
4. Appling's comprehensive income will be
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Transcribed Image Text:Appling Enterprises issued 9% bonds with a face amount of $410,000 on January 1, 2018. The bonds sold for $374,824 and mature in
2037 (20 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and
December 31. Appling determines interest expense at the effective rate. Appling elected the option to report these bonds at their fair
value. The fair values of the bonds at the end of each quarter during 2018 as determined by their market values in the over-the-
counter market were the following:
March 31
June 30
September 30
December 31
$400,000
385,000
378,000
385,000
General (risk-free) interest rates did not change during 2018.
Required:
1. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the March 31
quarterly financial statements?
2. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the June 30
quarterly financial statements?
3. By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the September 30
quarterly financial statements?
4.By how much will Appling's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31
annual financial statements?
(For all requirements, Do not round your intermediate calculations.)
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Step 1: Cash Flows
VIEWStep 2: Calculation of Fair value of financial liability and Effective Interest Rate
VIEWStep 3: Financial Liability amortization table and Calculation of fair value gain/loss
VIEWStep 4: Calculation of change in Total Comprehensive Income for each quarter (2018) due to bonds
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