INTERMEDIATE ACCT.-MYLAB COMBO ACCESS
3rd Edition
ISBN: 9780137391707
Author: GORDON
Publisher: PEARSON
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Chapter 16, Problem 16.5BE
To determine
To prepare:
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H2
Dino Company purchased a bond with a face value of $100,000 with a stated interest rate of 6% that pays interest semi-annually on June 30 and December 31. The bond was purchased on January 1, 20X1 and matures in 5 years. It was purchased at 91.889 when interest rates in the market were 8%. Record journal entries that the company would record during 20X1 if the company accounts for this investment under the amortized cost model. Indicate the amounts that would appear on the year-end statement of financial position with regard to this investment. Assume that market interest rate fell to 2% by January 1, 20X3. On that date the bond investment was sold. Record the journal entry that would be made at that time.
On January 2, 2018 Pearl corporation purchased 10%, $1.500,000 bonds of Gold Company to yield 11%. The bonds are due December 31, 2027 and pay interest annually each December 31.
Pearl intention is to generate profit from short-term differences in prices and accordingly, has classified the debt investment as trading. Following is a partial amortization schedule for these bonds extracted from
Pearl's records:
AMORTIZATION SCHEDULE
10-Year, 10% Bonds Sold to Yield 11%
Carrying
Cash
Interest
Discount
Amount of
Date
Received
Revenue
Amortized
Bonds
1/2/18
$1,411,655
12/31/18
???
155.86
???
$150,000
150,000
???
12/31/19
5,863
1,422,800
3
1.429,308
???
12/31/20
150,000
156,508
6.508
12/31/21
150,000
???
12/31/22
150,000
158,019
8,019
1,444.551
Required:
a) Calculate the missing numbers in the previous table for the years 2018 and 2021.
b) Assume that the fair value of the bonds on December 31, 2020, is $1.440,000. Prepare the necessary adjusting entry
c) Show in proper format the effect on…
On January 1 of the current year, Baker Corp. purchased $50,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature in ten years on December 31. The investment is classified as a held-to-maturity investment because Baker has the intent and the ability to hold the bonds for 10 years. The effective rate on the bonds is 4.5%.
Amortization Schedule
Journal Entries and Balance Sheet Presentation
c. Prepare the journal entry for the purchase of the investment on January 1.
Date
Account Name
Dr.
Cr.
Jan. 1, Year 1
To record purchase of investment.
d. Prepare the journal entries to record interest received on December 31 of Year 1 and December 31 of Year 2.
Date
Account Name
Dr.
Cr.
Dec. 31, Year 1
To record interest received.
Dec. 31, Year 2
To record interest received.
e. Indicate the carrying value of the Chocolate bonds on…
Chapter 16 Solutions
INTERMEDIATE ACCT.-MYLAB COMBO ACCESS
Ch. 16 - Prob. 16.1QCh. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Prob. 16.5QCh. 16 - Prob. 16.6QCh. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9QCh. 16 - Can companies apply the fair value option to all...
Ch. 16 - What is the fair value hierarchy for investment...Ch. 16 - Prob. 16.12QCh. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Prob. 16.16QCh. 16 - Prob. 16.17QCh. 16 - Deutsch Imports has three securities in its...Ch. 16 - Prob. 16.2MCCh. 16 - Prob. 16.3MCCh. 16 - Prob. 16.4MCCh. 16 - Prob. 16.5MCCh. 16 - Prob. 16.6MCCh. 16 - Prob. 16.7MCCh. 16 - Prob. 16.1BECh. 16 - Prob. 16.2BECh. 16 - Debt Investments, Trading. Using the information...Ch. 16 - Prob. 16.4BECh. 16 - Prob. 16.5BECh. 16 - Prob. 16.6BECh. 16 - Prob. 16.7BECh. 16 - Prob. 16.8BECh. 16 - Prob. 16.9BECh. 16 - Prob. 16.10BECh. 16 - Prob. 16.11BECh. 16 - Prob. 16.12BECh. 16 - Prob. 16.13BECh. 16 - Notes Receivable. Aaron Anatole accepted a...Ch. 16 - Prob. 16.15BECh. 16 - Prob. 16.16BECh. 16 - Prob. 16.17BECh. 16 - Debt Investments. Impairments. IFRS. For each debt...Ch. 16 - Prob. 16.19BECh. 16 - Prob. 16.1ECh. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Debt and Equity Investments, Available-for-Sale...Ch. 16 - Prob. 16.9ECh. 16 - Equity Investments without a Readily Determinable...Ch. 16 - Prob. 16.11ECh. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Equity-Investments, Equity Method. Book Value of...Ch. 16 - Prob. 16.15ECh. 16 - Prob. 16.16ECh. 16 - Notes Receivable. Each of the following three...Ch. 16 - Prob. 16.18ECh. 16 - Prob. 16.19ECh. 16 - Prob. 16.20ECh. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.1PCh. 16 - Debt Investments, Trading. Freder Software Group...Ch. 16 - Prob. 16.3PCh. 16 - Equity Investments, Readily Determinable Fair...Ch. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Equity Investments, Equity Method, Fair Value...Ch. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Prob. 16.19PCh. 16 - Prob. 1JCCh. 16 - Prob. 2JCCh. 16 - Prob. 1SSCCh. 16 - Prob. 1BCCCh. 16 - Prob. 2BCC
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