On April 1, 2024, Déjà Vu Company issued 12% bonds that have a total face value of$140,000 (each bond has a face value of $1,000). The bonds sold for $164,023 and mature in 20years. The effective interest rate for the bonds was 10% on 4/1/24. Interest is paid semiannuallyon September 30 and March 31. The market value of the bonds was 102 on 12/31/24 and $104 on12/31/25. The market rate of interest on the bonds fell to 9% on 8/1/24.David Company purchased all of the bonds as an investment on 4/1/2024. A partial amortizationschedule appears below.9/30/2024 8,4003/31/2025 8,4009/30/2025 8,4003/31/2026 8,4009/30/2026 8,4003/31/2027 8,4009/30/2027 8,400CashInterest$__InterestIncome8,2018,1918,1818,1708,1588,1468,134$_PremiumAmortized199209219230242254266What is the amount of assets related to the bonds on David's balance sheet:As of 12/31/24 if the bonds are accounted for as held-to-maturity.CarryingValue164,023163,824163,615$_As of 12/31/2024 if the bonds are accounted for as available-for-sale.As of 12/31/2024 if the bonds are accounted for as trading.163,396163,166162,924162,670162,404

Investment in debt securities can be classified under three different categories based on the intent…

On April 1, 2024, Déjà Vu Company issued 12% bonds that have a total face value of $140,000 (each bond has a face value of $1,000). The bonds sold for $164,023 and mature in 20 years. The effective interest rate for the bonds was 10% on 4/1/24. Interest is paid semiannually on September 30 and March 31. The market value of the bonds was 102 on 12/31/24 and $104 on 12/31/25. The market rate of interest on the bonds fell to 9% on 8/1/24. David Company purchased all of the bonds as an investment on 4/1/2024. A partial amortization schedule appears below. Cash Interest 9/30/2024 8,400 3/31/2025 8,400 9/30/2025 8,400 3/31/2026 8,400 9/30/2026 8,400 3/31/2027 8,400 9/30/2027 8,400 Interest Income $_ 8,201 8,191 8,181 8,170 8,158 8,146 8,134 Premium Amortized 199 209 219 230 242 254 266 Carrying Value 164,023 163,824 163,615 163,396 163,166 What is the amount of assets related to the bonds on David's balance sheet: As of 12/31/24 if the bonds are accounted for as held-to-maturity. As of 12/31/2024 if the bonds are accounted for as trading. 162,924 162,670 162,404 $_ As of 12/31/2024 if the bonds are accounted for as available-for-sale.

On April 1, 2024, Déjà Vu Company issued 12% bonds that have a total face value of $140,000 (each bond has a face value of $1,000). The bonds sold for $164,023 and mature in 20 years. The effective interest rate for the bonds was 10% on 4/1/24. Interest is paid semiannually on September 30 and March 31. The market value of the bonds was 102 on 12/31/24 and $104 on 12/31/25. The market rate of interest on the bonds fell to 9% on 8/1/24. David Company purchased all of the bonds as an investment on 4/1/2024. A partial amortization schedule appears below. Cash Interest 9/30/2024 8,400 3/31/2025 8,400 9/30/2025 8,400 3/31/2026 8,400 9/30/2026 8,400 3/31/2027 8,400 9/30/2027 8,400 Interest Income $_ 8,201 8,191 8,181 8,170 8,158 8,146 8,134 Premium Amortized 199 209 219 230 242 254 266 Carrying Value 164,023 163,824 163,615 163,396 163,166 What is the amount of assets related to the bonds on David's balance sheet: As of 12/31/24 if the bonds are accounted for as held-to-maturity. As of 12/31/2024 if the bonds are accounted for as trading. 162,924 162,670 162,404 $_ As of 12/31/2024 if the bonds are accounted for as available-for-sale.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 15MCQ

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