Question 4: Investments Please note that this question has two independent parts. Part 1: On January 1, 2020, Hamilton Financial (HF) purchased a six-year, $150,000 bond from Think Plane Company for $128,551. The bond offers a 4% coupon rate and pays coupons annually on December 31 of each year. At the time of the purchase of this bond, the market rate on comparable securities was 7%. HF will use the following amortization table for this bond (numbers have been rounded to the nearest decimal, small rounding differences of up to $1 might occur): Difference Beginning Ending Coupon Interest Balance Fair Value (FV-BV) Date Balance 1/1/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2026| 0.00 2700 -400 128,551 128,551 6,000 8,999 131,549 6,000 9,208 134,758 6,000 9,433 138,191 6,000 9,673 141,864 6,000 9,930 145,794 6,000 10,206| 128,551 131,549 134,249 134,758 134,358 138,191 141,864 145,794 150,000 HF included this security in its portfolio of Available for Sale (AFS) marketable securities. A. Record HF's journal entries for this bond in 2020 and 2021 ignoring any tax effects. Please indicate whether unrealized gains/losses go through OCI or through net income.
Question 4: Investments Please note that this question has two independent parts. Part 1: On January 1, 2020, Hamilton Financial (HF) purchased a six-year, $150,000 bond from Think Plane Company for $128,551. The bond offers a 4% coupon rate and pays coupons annually on December 31 of each year. At the time of the purchase of this bond, the market rate on comparable securities was 7%. HF will use the following amortization table for this bond (numbers have been rounded to the nearest decimal, small rounding differences of up to $1 might occur): Difference Beginning Ending Coupon Interest Balance Fair Value (FV-BV) Date Balance 1/1/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2026| 0.00 2700 -400 128,551 128,551 6,000 8,999 131,549 6,000 9,208 134,758 6,000 9,433 138,191 6,000 9,673 141,864 6,000 9,930 145,794 6,000 10,206| 128,551 131,549 134,249 134,758 134,358 138,191 141,864 145,794 150,000 HF included this security in its portfolio of Available for Sale (AFS) marketable securities. A. Record HF's journal entries for this bond in 2020 and 2021 ignoring any tax effects. Please indicate whether unrealized gains/losses go through OCI or through net income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education