On January 1, 2015, when the prevailing effective rate on similar instruments was at 7%, INC Company acquired USD3,000,000, 10-year bonds of GHI Company. Transaction costs of USD243,114.27 were incurred in the purchase, resulting to a new effective interest rate of 6%. The bonds will be accounted as a financial asset at fair value through other comprehensive income and will pay interest of 9% every June 30 and December 31. Hence, the investments in bonds of INC Company will be initially recorded at what amount?
On January 1, 2015, when the prevailing effective rate on similar instruments was at 7%, INC Company acquired USD3,000,000, 10-year bonds of GHI Company. Transaction costs of USD243,114.27 were incurred in the purchase, resulting to a new effective interest rate of 6%. The bonds will be accounted as a financial asset at fair value through other comprehensive income and will pay interest of 9% every June 30 and December 31. Hence, the investments in bonds of INC Company will be initially recorded at what amount?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2015, when the prevailing effective rate on similar instruments was at 7%, INC Company acquired USD3,000,000, 10-year bonds of GHI Company. Transaction costs of USD243,114.27 were incurred in the purchase, resulting to a new effective interest rate of 6%. The bonds will be accounted as a financial asset at fair value through other comprehensive income and will pay interest of 9% every June 30 and December 31. Hence, the investments in bonds of INC Company will be initially recorded at what amount?
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