On January 1, 2018, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000. The Cortlandbonds have a stated interest rate of 6%. Interest is paid semiannually on June 30 and December 31, and the bondsmature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows:January 1, 2018 7.0%June 30, 2018 8.0%December 31, 2018 9.0%Required:1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2018 (ignoring brokeragefees), and prepare a journal entry to record the purchase.2. Prepare all appropriate journal entries related to the bond investment during 2018, assuming Ithaca accountsfor the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rateas of the date it purchased the bonds.3. Prepare all appropriate journal entries related to the bond investment during 2018, assuming that Ithaca chosethe fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.
On January 1, 2018, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000. The Cortland
bonds have a stated interest rate of 6%. 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:
January 1, 2018 7.0%
June 30, 2018 8.0%
December 31, 2018 9.0%
Required:
1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2018 (ignoring brokerage
fees), and prepare a
2. Prepare all appropriate journal entries related to the bond investment during 2018, 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 journal entries related to the bond investment during 2018, assuming that Ithaca chose
the fair value option when the bonds were purchased, and that Ithaca determines fair
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