Carsen Company purchased $200,000 of 10% bonds of Garrison Co. on January 1, 2012, paying $211,950. The bonds mature January 1, 2022; interest is payable each July 1 and January 1. The discount of $11,950 provides an effective yield of 9%. Carsen's objective is to hold the bonds to collect the contractual cash flows. Carsen Company uses the effective interest method. On July 1, 2012, Carsen Company should decrease its Held-for-collection Debt Investments account for the Garrison Co. bonds by: 1. $462. 2. $808. 3. $924. 4. $1,598.

Carsen Company purchased $200,000 of 10% bonds of Garrison Co. on January 1, 2012, paying $211,950. The bonds mature January 1, 2022; interest is payable each July 1 and January 1. The discount of $11,950 provides an effective yield of 9%. Carsen's objective is to hold the bonds to collect the contractual cash flows. Carsen Company uses the effective interest method. On July 1, 2012, Carsen Company should decrease its Held-for-collection Debt Investments account for the Garrison Co. bonds by: 1. $462. 2. $808. 3. $924. 4. $1,598.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1, 2020, HIBISCUS Company purchased 4,000 of ₱1,000 face value, 10% bonds of IXORA Company for ₱4,270,600. The bonds will mature on January 1, 2025 and pay interest semi-annually on January 1 and July 1. Bonds effective interest rate is 8%. HIBISCUS has a business model of collecting all the contractural cash flows related to the instrument. How much should HIBISCUS report as interest income on the bonds?
PUP CAF Corporation acquired a 4-year, P3,000,000 par value bonds when the prevailing rate of interest is 14% on January 1, 2020. Interests of 12% are collectible every December 31. The Company’s business model is to collect contractual cash flows and to sell the bonds when circumstances allow. The bonds were selling at 101 on December 31, 2020 and 95 on December 31, 2021. How much is the unrealized gain (loss) recognized in the statement of comprehensive income for the year ended December 31, 2021?
On January 1, 2020, Splish Company purchased $300,000, 6% bonds of Cabana Co. for $313,128. The bonds were purchased to yield 5% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Splish Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Splish Company sold the bonds for $305,400 after receiving interest to meet its liquidity needs.
Fowler Incorporated purchased $86,000 of bonds on January 1, 2024. The bonds pay interest semiannually and mature in 25 years, at which time the $86,000 principal will be paid. The bonds do not pay any amounts other than interest and principal. Fowler's intention is to collect contractual cash flows and eventually sell the bonds within the next couple of years if the price is right. During 2024, the fair value of the bonds increased to $102,000. Fowler reports investments under IFRS No. 9. How much unrealized gain or loss will Fowler include in 2024 net income with respect to the bonds? Unrealized gain (loss) reported in net income
On January 1, Year 1, Tina Company purchased bonds with face value of P4,000,000 for P4,206,000. The business model in managing the financial asset is to collect contractual cash flows that are solely payments of principal and interest and also to sell the bonds in the open market. The bonds mature on December 31, Year 3, and pay 10% interest annual on December 31 each year with 8% effective yield rate. The bonds are quoted at 95 on December 31, Year 1 and 90 on December 31, Year 2.What amount of unrealized loss should be reported as component of other comprehensive income in Year 1? 342,480 406,000 469,520 None of the above
On July 1, 2020, West Company purchased for cash, ten $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature on July 1, 2023. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Note: Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Adjust market interest in the final year of the bond term for any net rounding difference.
On January 1, 2024, Rupar Retallers purchased $100,000 of Anand Company bonds at a discount of $6,000. The Anand bonds pay 6% interest but were purchased when the market interest rate was 7% for bonds of similar risk and maturity. The bonds pay interest semiannually on June 30 and December 31 of each year. Rupar accounts for the bonds as a held-to-maturity Investment, and uses the effective interest method. In Rupar's December 31, 2024, journal entry to record the second period of Interest, Rupar would record a credit to interest revenue of Multiple Choice O O $3,000 $3,500 $1.300
On January 1, 2019, LEMON Company purchased bonds with face amount of ₱6,000,000 for ₱6,309,000. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds in the open market. The bonds mature on December 31, 2021 and pay 10% interest annually on December 31 each year with 8% effective yield. The bonds are quoted at 95 and 90 on December 31, 2019 and December 31, 2020, respectively. What amount of cumulative unrealized gain or loss should be reported in the statement of financial position on December 31, 2020?
On July 1, 2021, Rehearse Company issued $34,000,000 of 20-year, 12% bonds to finance its operations. The bonds were issued at a market (effective) interest rate of 13%, resulting in Rehearsal Company receiving cash of $31,595,241. Interest is payable semiannualy on 12/31 and 6/30. The company uses the straight-line method to amortize the bond discount. REQUIRED: Journalize the entries to record the following: 07/01/21 - issuance of the bonds 12/31/21 - the first semiannual interest payment, including amortization of the bond discount. Round to the nearest dollar. 06/30/22 - the second semiannual interest payment, including amortization of the bond discount. Round to the nearest dollar
On January 1, 2020, National Retail purchased $100,000 of GEH Company bonds at a discount of $10,000. The GEH bonds pay 6% interest but were purchased when the market interest rate was 8% for bonds of similar risk and maturity. The bonds pay interest semiannually on June 30 and December 31 of each year. National Retail accounts for the bonds as a held-to-maturity investment and uses the effective interest method. In National Retail's December 31, 2020, journal entry to record the second period of interest would include a credit to interest revenue of: $3,000 $3,600 $3,336 d. $7,336 e. $3,624 a. b. C.
On June 1, 2017, HIJ Company purchased bonds with a face amount of 3,000,000 to be held to maturity. The stated rate on the bonds is 10% but the bonds are acquired to yield 11%. The bonds mature at the rate of 1,000,000 annually every May 31 starting May 31, 2018 and interest is payable annually also on May 31. The entity used the effective interest method of amortizing discount.1. What is the total amortization for 2018?2. What is the carrying amount of the bond investment on December 31, 2019?
Cotton Candy Company purchased $1,500,000 of 10% bonds of Caramel Company on January 1, 2024, paying $1,410,375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. For the year ended December 31, 2024, Cotton Candy Companys income statement will report interest revenue from the Caramel Company bonds of

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