Turtle Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2017. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2017, was $70 million. a. Prepare the relevant journal entries
Turtle Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2017. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2017, was $70 million. a. Prepare the relevant journal entries
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Turtle Inc., purchased as a long-term
investment $80 million of 8% bonds,
dated January 1, on January 1, 2017.
Management intends to have the
investment available for sale when
circumstances warrant. For bonds of
similar risk and maturity the market
yield was 10%. The price paid for the
bonds was $66 million. Interest is
received semiannually on June 30 and
December 31. Due to changing market
conditions, the fair value of the bonds
at December 31, 2017, was $70 million.
a. Prepare the relevant journal entries
on the respective dates (record the
interest at the effective rate).
b. At what amount will Turtle Inc.
report its investment in the December
31, 2017, balance sheet?
c. Prepare the entry necessary to
achieve this reporting objective.
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