The following transactions relate to bond investments of Livermore Laboratories. The company's fiscal year ends on December 31.Livermore uses the straight-line method to determine interest.2024July 1 Purchased $22 million of Bracecourt Corporation 12% debentures, due in 20 years (June 30, 2044), for $21.1 million.Interest is payable on January 1 and July 1 of each year.October 1 Purchased $36 million of 14% Framm Pharmaceuticals debentures, due May 31, 2034, for $37,856,000 plus accrued interest.Interest is payable on June 1 and December 1 of each year.December 1 Received interest on the Framm bonds.December 31 Accrued interest.2025January 1 Received interest on the Bracecourt bonds.June 1 Received interest on the Framm bonds.July 1 Received interest on the Bracecourt bonds.September 1 Sold $18.0 million of the Framm bonds at 102 plus accrued interest.December 1 Received interest on the remaining Framm bonds.December 31 Accrued interest.2026January 1 Received interest on the Bracecourt bonds.February 28 Sold the remainder of the Framm bonds at 103 plus accrued interest.December 31 Accrued interest.Required:1. Prepare the appropriate journal entries for these long-term bond investments.2. By how much will Livermore Labs' earnings increase in each of the three years as a result of these investments? (Ignore incometaxes.)Answer is not complete.Complete this question by entering your answers in the tabs below.Required 1 Required 2Prepare the appropriate journal entries for these long-term bond investments.Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not roundyour intermediate calculations. Enter your answers in whole dollars.NoDateGeneral Journal1July 01, 2024Investment in bondsCachDebit21,100,000 xCredit31 100.000

Bonds represent debt securities where investors lend money to entities, such as governments or…

Required: 1. Prepare the appropriate journal entries for these long-term bond investments. 2. By how much will Livermore Labs' earnings increase in each of the three years as a result of these investments? (Ignore income taxes.)

Required: 1. Prepare the appropriate journal entries for these long-term bond investments. 2. By how much will Livermore Labs' earnings increase in each of the three years as a result of these investments? (Ignore income taxes.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

I. An investor purchases a bond worth Rp. 100 million, with a 15% interest tax on the bond. The investor is faced with two different cases. Case 1: Annual inflation = 0.5%, nominal interest rate = 3.17% / yearCase 2: Annual inflation = 2.96%, nominal interest rate = 5.63% / year a. In which cases do the investors receive the highest real returns? Explain. b. In which case did the investor pay the highest taxes? Explain. c. If you can choose, which is the best case for investors to buy bonds? Explain.
Click here to view the factor table. https://education.wiley.com/content/Kieso_Intermediate_Accounting_17e/media/simulations/interest_rate_tables.pdf
You are analyzing how interest rates affect the equity value of a bank using a duration analysis. After examining the balance sheet of the bank, you noticed that the value of its total assets and liabilities are $400M and $360M, respectively. You also determined that the duration gap of the bank is equal to 4.0 years. Using a duration analysis, you would like to predict the response of the bank’s equity value (in percentage terms) to a 0.1 percent increase in the market interest rate. You decided to assume that a one percentage point change in the rate is approximately equal to a one percent change in the rate. Following this approach, determine the percentage response of the bank’s equity to this change in the market interest rate. Group of answer choices -0.4% -4.0% 0.4% -3.6% -0.1%
You are considering three alternative investments: A three-year bank CD paying 7.19 percent compounded quarterly. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) Effective annual rate ___________ % LINK TO TEXT A three-year bank CD paying 6.99 percent compounded monthly. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) Effective annual rate __________ % Which of the above investments has the highest effective annual interest rate (EAR)? The three-year bank CD paying has the highest effective yield a). 6.99% interest compand monthly b). 7.49% interest compond annually c). 7.19% interest compond quartley has the highest yield
9 Suppose you invested $500 in a local credit union and: f(t) gives the future value of the investment in t years, if the APR is 2% and interest is compounded quarterly. • g(t) gives the future value of the investment in t years, if the APR is 2% and interest is compounded monthly. h(t) gives the future value of the investment in f years, if the APR is 2% and interest is compounded continuously. a. Write a function rule for f(t). For g(t). For h(t). Then describe how the rules are similar and how they are different. b. Based on your understanding of exponential growth, describe how the graphs of f(t), g(t), and h(t) are similar, and how they are different. c. On the same coordinate grid, use algebraic reasoning to sketch graphs of the three functions. .
Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from holding a one-year corporate bond with a yield of 5.25 percent? (1 pt) 2. What is your after-tax return from a holding a one-year municipal bond with a yield of 4 percent? (1 pt) 3. How would you decide which bond to hold? (Assume that Both bonds carry the same risk.) (1 pt)
Which of the given interest rates and compounding periods would provide the best investment? (a) 8 percent per year, compounded semiannually; (b) 8 percent per year, compounded quarterly; (c) 8 percent per year, compounded continuously. Your answer is (input a, b, or c)
Ac
show the step by step solutions and what required it is
A firm, whose cost of capital is 8 percent, may acquire equipment for $146,825 and rent it to someone for a period of five years. Note: Although payment of rent is typically considered to be an annuity due, treat it as an ordinary annuity when completing this problem in a spreadsheet or when using present value factors. If the firm charges $38,730 annually to rent the equipment, what are the net present value and the internal rate of return on the investment? Use Appendix D to answer the questions. Use a minus sign to enter negative values, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number. NPV: $ IRR: % Should the firm acquire the equipment? The firm acquire the equipment as the net present value is , and the internal rate of return the firm's cost of capital. If the equipment has no estimated residual value, what must be the minimum annual rental charge for the firm to earn the required 8…
3. You own several bonds and as an astute investor, you keep track of your interest payments (also known as coupon payments or cash flows). Annually, you receive a fixed total of interest payments of $2,000 per year from these bonds for the next 5 years and your required rate of return is 7.5%. What is the current value of your bond investment? Show your work and explain your answer.
Answer ASAP please write the formula used please.