On April 1, 2020 Everjoy Company purchased $80,000 of Miller Corporation's 6% bonds at a purchase price of 96. At the time of purchase the market rate of interest was 8%. Everjoy Company, whose year end is December 31, expects to hold the bonds until their maturity date 5 years from the date of purchase. Interest on the bonds will be paid every April 1 and October 1 until maturity. What s the carrying value (amortized cost) of the bond that Everjoy Company would report on October 1, 020? O $78,144 $77,120 $79,488 $77,472

On April 1, 2020 Everjoy Company purchased $80,000 of Miller Corporation's 6% bonds at a purchase price of 96. At the time of purchase the market rate of interest was 8%. Everjoy Company, whose year end is December 31, expects to hold the bonds until their maturity date 5 years from the date of purchase. Interest on the bonds will be paid every April 1 and October 1 until maturity. What s the carrying value (amortized cost) of the bond that Everjoy Company would report on October 1, 020? O $78,144 $77,120 $79,488 $77,472

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: On January 1, 2021, Kaye Ltd. purchased $250,000 of Danford Co.'s 4%, 8-year bonds. The market rate…

A: Under Effective Interest Rate Method , Interest Income/Expense will be recognized at Market Rate.

Q: On January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 bond. The bond matured…

A: Bonds refer to the financial instrument issued by the bank or financial institution at a specified…

Q: On December 31, 2020, Alberta Inc. purchased $500,000, 10% bonds issued by Banff Ltd. The bonds have…

A: Bond should be valued at at current market price. If market price is changes after bond issued then…

Q: nterest at 6% every June 30 and December 31. The market interest rate 31, and the company had the…

A: The amortization cost model provides insight into how bond prices change over time due to the…

Q: od to amortize discount or premium. On Ja Is for $258,816 after receiving interest to m 1/27 - /27 -…

A: Calculate the semiannual interest income using the effective-interest method:The effective interest…

Q: On January 1, 2017, Sarasota Corporation purchased 331 of the $1,000 face value, 9%, 10-year bonds…

A: The problem is asking us to calculate the purchase price of the bonds bought by Sarasota…

Q: On January 1, 2023, Ayayai Limited pays $110,522 to purchase $125,000 of Chan Corporation 7% bonds.…

A: The price of a bond is equal to the sum of the present value of the coupon payments and the present…

Q: On January 1, 2020, Metlock Company acquires $110,000 of Spiderman Products, Inc., 9% bonds at a…

A: The question is based on the concept of Financial Accounting.

Q: Spring Company sells $250,000 of 6%,15-year bonds for 56.886 on April 1,2021.The market rate of…

A: Bonds payable is one of the liability being incurred in business. It can be long term bonds or short…

Q: On July 1, 2023, DDJ Limited issued bonds with a face value of $900,000 due in 20 years, paying…

A: Bonds are issued below the face value than this is dicount and this is due to the higher interest in…

Q: On January 1, 2020, Metlock Company acquires $ 110,000 of Spiderman Products, Inc., 9% bonds at a…

Q: On January 1, 2020, Nash Company purchased $330,000, 8% bonds of Aguirre Co. for $304,517. The bonds…

A: Bond's purchased as available-for-sale are to be recorded at their fair value in books.

Q: On January 1, 2020, Pronghorn Company acquires $270,000 of Spiderman Products, Inc., 9% bonds at a…

A: Definition of interest revenue: Revenue received on lending the money is called interest revenue.…

Q: On January 1, 2025, Copa Company purchased $300,000, 6% bonds of Cabana Co. for $313,128. The bonds…

A: Bonds are issued by organizations to raise long-term funds. Bonds can be issued at par, at a…

Q: On January 1, 2023, Pronghorn Limited pays $105,753 to purchase $110,000 of Chan Corporation 9%…

A: Bonds selling at a price below the face value result in discount. The discount on bonds is amortized…

Q: On January 1, 2020, Kingbird Corporation purchased 325 of the $1,000 face value, 11%, 10-year bonds…

A: Issue price of the bonds = Present value of principal + Present value of interest payments where,…

Q: On Jan. 1, 2021, ABC bought serial bonds with a face value of P2,400,000 for P2,160,000 cash. The…

A: Given: The value includes face value of P2,400,000 for P2,160,000 cash. It will be paid in…

Question

On April 1, 2020 Everjoy Company purchased $80,000 of Miller Corporation's 6% bonds at a
purchase price of 96. At the time of purchase the market rate of interest was 8%. Everjoy Company,
whose year end is December 31, expects to hold the bonds until their maturity date 5 years from the
date of purchase. Interest on the bonds will be paid every April 1 and October 1 until maturity. What
is the carrying value (amortized cost) of the bond that Everjoy Company would report on October 1,
2020?
O $78,144
O $77,120
O $79,488
O $77,472
O None of the above.

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 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

On December 31, 2020, Alberta Inc. purchased $500,000, 10% bonds issued by Banff Ltd. The bonds have a maturity date of December 31, 2026. The market interest rate on December 31, 2020 was 9.5%. If Alberta Inc. accounts for this investment under the amortized cost model, what is the amount at which the Investment in Banff Ltd. Bonds will be reported on the statement of financial position at December 31, 2021, given that the current market interest rate is 9%? $519,448 $509,599 $511,050 $490,523
On January 1, 2023, Larkspur Corporation purchased a newly issued $1,500,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Larkspur's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) the price paid for the bond is $ 1,421,367.95
On February 18, 2021, Union Corporation purchased 1,311 IBM bonds as a long-term investment at their face value for a total of $1,311,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $1,273,000 and $1,330,000, respectively. Required: 2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a
On January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Marigold's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2-PRESENT VALUE OF 1-(PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4-PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) PV S
On January 1, 2019, Alpha Inc purchased $500,000, 9% bonds issued by Beta Corp. The bonds have a maturity date of December 31, 2024. The market interest rate on January 1, 2019 was 10%. If Alpha Inc accounts for this investment under the FVOCI model, what is the amount at which the Investment in Beta Corp. Bonds will be reported on the statement of financial position at December 31, 2021, given that the current market interest rate is 9.5%? $490,401 $481,046 $487,566 $493,728
On January 1, 2023, Teal Corporation purchased a newly issued $1,425,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Teal's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2 - PRESENT VALUE OF 1- (PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) X Your answer is incorrect. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) PV $ -1062917.95 4
On January 1, 2020, Kendall Co. purchased to hold to maturity, 1000, $1,000, 9% bonds for a price to yield an effective interest rate of 10% . Interest is paid semiannually on December 31 and June 30 and the bonds mature on December 31, 2023. What price did Kendall Company pay for this bond?
On January 1, 2020, Pronghorn Company acquires $270,000 of Spiderman Products, Inc., 9% bonds at a price of $244,500. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Pronghorn Company a 13% yield. The bonds are classified as held-to-maturity. (c) Prepare the journal entry for the interest revenue and discount amortization under the straight-line method at December 31, 2021. (d) Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2021. (Round answers to 0 decimal places, e.g. 2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (c) (d)
On January 1, 2020, Metlock Company acquires $ 110,000 of Spiderman Products, Inc., 9% bonds at a price of $ 99,611. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Metlock Company a 13% yield. The bonds are classified as held-to-maturity. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method. (Round answers to 0 decimal places, e.g. 2,500.) Schedule of Interest Revenue and Bond Discount AmortizationEffective-Interest MethodBond Purchased to Yield Date CashReceived InterestRevenue Bond DiscountAmortization Carrying Amountof Bonds 1/1/20 $ enter a dollar amount $ enter a dollar amount $ enter a dollar amount $ enter a dollar amount 1/1/21 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/22 enter a dollar amount…
On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $210,000. The Cortland bonds have a stated interest rate of 10%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): January 1, 2021 11.0 % June 30, 2021 12.0 % Required:1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.3. Prepare all appropriate…