What is the total amount of interest revenue that Redbud will recognize over the life of the bonds? АССТ 3113Supplemental 11 Chapter 12 Investments in debt securities (HTM)Redbud Company purchased Hobie Company's 12% bonds with a face amount of $700,000 on July 1, 2021. The 15-year bondsmature on June 30, 2035. For bonds of similar risk and maturity, the market rate of interest was 14%. Interest is paid semiannuallyon June 30 and December 31. Redbud used the effective interest method to amortize the bond discount.a. Determine the price that Redbud will pay for the bonds on July 1, 2021.b. Prepare the journal entry to record the purchase on July 1, 2021.c. What is the total amount of interest revenue that Redbud will recognize over the life of the bonds?d. Record the interest recognized on December 31, 2021.e. The fair value of the Hobie bonds on December 31, 2021, is $625,000. Show the amounts reported on Redbud's 2021financial statements if the investment is classified as a held-to-maturity security reported at amortized cost.Income statementBalance sheetf. Record the interest recognized on June 30, 2022.g. Record the sale of the bonds on July 1, 2022, for $ 623,000. [Hint: compute the gain/loss on sale by comparing theamortized cost on July 1, 2022, to the selling price.]

a. Price of bond = [Coupon payment x PVIFA7%,30] + [Face value x PVIF7%,30] = [700000 x 6% x…

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Chapter1: Financial Statements And Business Decisions

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Question

What is the total amount of interest revenue that Redbud will recognize over the life of the bonds?

АССТ 3113
Supplemental 11 Chapter 12 Investments in debt securities (HTM)
Redbud Company purchased Hobie Company's 12% bonds with a face amount of $700,000 on July 1, 2021. The 15-year bonds
mature on June 30, 2035. For bonds of similar risk and maturity, the market rate of interest was 14%. Interest is paid semiannually
on June 30 and December 31. Redbud used the effective interest method to amortize the bond discount.
a. Determine the price that Redbud will pay for the bonds on July 1, 2021.
b. Prepare the journal entry to record the purchase on July 1, 2021.
c. What is the total amount of interest revenue that Redbud will recognize over the life of the bonds?
d. Record the interest recognized on December 31, 2021.
e. The fair value of the Hobie bonds on December 31, 2021, is $625,000. Show the amounts reported on Redbud's 2021
financial statements if the investment is classified as a held-to-maturity security reported at amortized cost.
Income statement
Balance sheet
f. Record the interest recognized on June 30, 2022.
g. Record the sale of the bonds on July 1, 2022, for $ 623,000. [Hint: compute the gain/loss on sale by comparing the
amortized cost on July 1, 2022, to the selling price.]

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