FINANCIAL ACCOUNTING 9TH
16th Edition
ISBN: 9781308821672
Author: Libby
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter A, Problem 1P
1.
To determine
Indicate the accounts that are effected in the books of the investor, by the purchase of bonds held-to-maturity on July 1.
2.
To determine
Indicate the accounts that are effected in the books of the investor, by the receipt of interest on December 31, from the investment in bonds held-to-maturity.
3.
To determine
Explain whether Corporation S should record the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Accounting for debt investments
League Up & Co. owns vast amounts of corporate bonds. Suppose League Up buys $900,000 of CocoCorp bonds at face value on January 2, 2018. The CocoCorp bonds pay interest at the annual rate of 8% on June 30 and December 31 and mature on December 31, 2022. League Up intends to hold the investment until maturity.
Requirements
How would the bond investment be classified on League up’s December 31, 2018, balance sheet?
Journalize the following on League Up’s books:
a. Receipt of final interest payment, on December 31, 2022.
b. Disposition of the investment at maturity on December 31, 2022.
Accounting for debt investments
Advance & Co. owns vast amounts of corporate bonds. Suppose Advance buys 51,100,000 of FermaCo bonds at face value on January 2, 2018. The FermaCo bonds pay interest at the annual rate of 3% on June 30 and December 31 and mature on December 31, 2037. Advance intends to hold the investment until maturity
Requirements
Journalize any required 2018 entries for the bond investment.
How much cash interest will Advance receive each year from FermaCo?
How much interest revenue will Advance report during 2018 on this bond investment?
Cop
Chapter A Solutions
FINANCIAL ACCOUNTING 9TH
Ch. A - Prob. 1QCh. A - Explain the difference in accounting methods used...Ch. A - Explain how bonds held to maturity are reported on...Ch. A - Explain the application of the cost principle to...Ch. A - Under the fair value method, when and how does the...Ch. A - Under the equity method, why does the investor...Ch. A - Prob. 7QCh. A - Prob. 8QCh. A - Prob. 9QCh. A - Company X owns 40 percent of Company Y and...
Ch. A - Prob. 2MCQCh. A - Dividends received from stock that is reported as...Ch. A - Prob. 4MCQCh. A - Prob. 5MCQCh. A - When using the equity method of accounting, when...Ch. A - Prob. 7MCQCh. A - Prob. 8MCQCh. A - Which of the following is true regarding the...Ch. A - Prob. 10MCQCh. A - Matching Measurement and Reporting Methods Match...Ch. A - Prob. 2MECh. A - Prob. 3MECh. A - Prob. 4MECh. A - Prob. 5MECh. A - Prob. 6MECh. A - Prob. 7MECh. A - Prob. 8MECh. A - Prob. 9MECh. A - Prob. 10MECh. A - Prob. 11MECh. A - Prob. 1ECh. A - Prob. 2ECh. A - Recording Transactions in the Available-for-Sale...Ch. A - Prob. 4ECh. A - Prob. 5ECh. A - Reporting Gains and Losses in the Trading...Ch. A - Prob. 7ECh. A - Prob. 8ECh. A - Prob. 9ECh. A - Prob. 10ECh. A - Prob. 11ECh. A - Prob. 1PCh. A - Prob. 2PCh. A - Prob. 3PCh. A - Prob. 4PCh. A - Prob. 5PCh. A - Comparing Methods to Account for Various Levels of...Ch. A - Prob. 7PCh. A - Recording Investments for Significant Influence LO...Ch. A - Prob. 9PCh. A - Prob. 10PCh. A - Prob. 11PCh. A - Prob. 1APCh. A - Prob. 2APCh. A - Reporting Passive Investments During January 2017,...Ch. A - Prob. 4APCh. A - Prob. 5APCh. A - Prob. 6APCh. A - Prob. 1CONCh. A - Finding Financial Information Refer to the...Ch. A - Prob. 2CPCh. A - Prob. 3CPCh. A - Prob. 4CPCh. A - Prob. 5CPCh. A - Prob. 6CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued 15,000,000 of 20-year, 9% callable bonds on May 1, 2016 at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 2016 May 1. Issued the bonds for cash at their face amount. Nov. 1. Paid the interest on the bonds. 2022 Nov. 1. Called the bond issue at 96, the rate provided in the bond indenture. (Omit entry for payment of interest.)arrow_forwardDogarrow_forwardVishnuarrow_forward
- Accounting Thank you in advance ! ABC Company purchased 50 Meissner AG 8%, 10-year, €1,000 bonds on January 1, 2022, for €50,000. The bonds pay interest annually on January 1. ABC's business model is to hold these bonds to collect contractual cash flows and sell. The market value of the bonds was €50,500 at the end of 2022. On January 1, 2023, after receipt of interest, ABC Company sold 30 of the bonds for €30,300. INSTRUCTIONS a. Prepare the journal entries to record the purchase of the bonds on January 1, 2022. b. Prepare the adjusting entry for the accrual of interest and the changes in bond value on December 31, 2022. (You can skip the closing entry.) c. Show the statement of financial position presentation from asset through equity section regarding the bond investments on December 31, 2022. d. Prepare the journal entry to record the receipt of interest, sale of the bonds, and reclassification adjustment on January 1, 2023. (You can skip the closing entry.)arrow_forwardCould you please help me with Req 4?arrow_forwardVinubhaiarrow_forward
- WORK Check my work Tanner-UNF Corporation acquired as an investment $235 million of 8% bonds, dated July 1, on July 1, 2024. Company management is holding the bonds in its treding portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $215 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (merket) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2024, balance sheet 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $180 milion. Prepare the journal entries…arrow_forwardEntity A is a listed company in Hong Kong for more than 20 years. Its business mainly focuses on the food industry. On 1 January 2016, Entity A invested in a bond with a face value of $8,500,000 and it pays a fixed interest of 6.00% for the first two years, then 9.25% fixed interest for the last two years. The fair value of the bond is $8,350,000 and the transaction cost for purchasing the bond is $53,523. Entity A made the payment to the issuer for the purchase of the bond by a cheque. The bond was planned to hold until maturity. The fair value option in measurement was not adopted. Interest is paid in arrears annually. The bond will be redeemed at a premium of 20% after 4 years. The effective rate for this bond is 12.00%. The 12-month expected credit loss and lifetime expected credit loss was initially estimated at $19,500 and $61,500 respectively. On 31 December 2016, there was no significant change in credit risk. The 12-month expected credit loss and lifetime expected…arrow_forwardPROBLEM E: You were engaged by SKT Company for the first time on February 15, 2018, to audit their financial statements as of and for the year ended December 31, 2017. In auditing their investment accounts, you decided to review the transactions and entries related to an investment in debt securities. On January 2, 2016, SKT acquired a 5-year 10% bond with a face value of P5,000,000 for P4,800,000. The entity incurred direct costs for P15,500, resulting to a yield rate of 11%. The business model of the entity for investing in debt securities is to collect contractual cash flows in the form of principal and interest on the outstanding principal, and to sell the financial assets. The bonds are quoted at 101 on December 31, 2016; 97 on December 31, 2017; and 99 on December 31, 2018. By the end of 2017, the balances in the statement of financial position of their Financial Asset – FVOCI and the related unrealized holding gain – OCI are P4,850,000 and P50,000, respectively. The entries…arrow_forward
- Determining the Proceeds from Bond Issues Madison Corporation is authorized to issue $830,000 of 5-year bonds dated June 30, 2016, with a stated rate of interest of 11%. Interest on the bonds is payable semiannually, and the bonds are sold on June 30, 2016. Required: Determine the proceeds that the company will receive if it sells the following: (Click here to access the tables to use with this exercise and round your answers to two decimal places, if necessary.) 1. The bonds to yield 12% 2. The bonds to yield 10% X Xarrow_forwardOn January 1, 2021, the company purchased 8% bonds in the face amount of P8,000,000. The bonds mature on January 1, 2026 and were purchased for P8,328,128 to yield 7%. Interest is payable annually every December 31. The business model for this investment is to collect contractual cash flows and to sell the bonds in the open market. Fair value Effective rate December 31, 2021 7,740,000 9% December 31, 2022 7,230,000 10% December 31, 2023 7,030,000 11% On December 31, 2023, the entity changed the business model to collect contractual cash flows only. On January 1, 2024, the fair of the bonds did not change. At what amount will the Financial asset-FVOCI be reclassified to Investment in bonds on January 1, 2024?arrow_forwardDon't give answer in imagearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License