Bonanzaa Limited held on 1st April, 2014 $ 2,00,000 of 9% Government Loan (2019) at $ 1,90,000. (Face Value of Loan $ 100 each). Three months’ interest had accrued on the above date. On 31st May, 2014 the company purchased the same Government Loan of the face value of $ 80,000 at $ 95 (net) cum-interest. On 1st June, 2014, $ 60,000 face value of the loan was sold at $ 94 (net) ex-Interest on the loan was paid each year on 30th June and 31st December and was credited by the bank on the same date. On 30th November, 2014 $ 40,000 face value of Loan was sold at $ 97 (net) cum-interest. On 1st December, 2014 the company purchased the same loan $ 10,000 at par ex-interest. On 1st March, 2015 the company sold $ 10,000 face value of the loan at $ 95 ex-interest. The market price of the loan on 31st March, 2015 was $ 96. Draw up 9% Government Loan (2014) Account in the books of Bonanzaa Limited. First in first out method shall be followed and the balance of the loan held by the company shall be valued at total average cost or market price whichever is lower. Calculations shall be made to the nearest value or multiple thereof.
Bonanzaa Limited held on 1st April, 2014 $ 2,00,000 of 9% Government Loan (2019) at $ 1,90,000. (Face Value of Loan $ 100 each). Three months’ interest had accrued on the above date. On 31st May, 2014 the company purchased the same Government Loan of the face value of $ 80,000 at $ 95 (net) cum-interest. On 1st June, 2014, $ 60,000 face value of the loan was sold at $ 94 (net) ex-Interest on the loan was paid each year on 30th June and 31st December and was credited by the bank on the same date. On 30th November, 2014 $ 40,000 face value of Loan was sold at $ 97 (net) cum-interest. On 1st December, 2014 the company purchased the same loan $ 10,000 at par ex-interest. On 1st March, 2015 the company sold $ 10,000 face value of the loan at $ 95 ex-interest. The market price of the loan on 31st March, 2015 was $ 96. Draw up 9% Government Loan (2014) Account in the books of Bonanzaa Limited. First in first out method shall be followed and the balance of the loan held by the company shall be valued at total average cost or market price whichever is lower. Calculations shall be made to the nearest value or multiple thereof.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 5E
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Bonanzaa Limited held on 1st April, 2014 $ 2,00,000 of 9% Government Loan (2019) at $ 1,90,000. (Face Value of Loan $ 100 each). Three months’ interest had accrued on the above date. On 31st May, 2014 the company purchased the same Government Loan of the face value of $ 80,000 at $ 95 (net) cum-interest. On 1st June, 2014, $ 60,000 face value of the loan was sold at $ 94 (net) ex-Interest on the loan was paid each year on 30th June and 31st December and was credited by the bank on the same date. On 30th November, 2014 $ 40,000 face value of Loan was sold at $ 97 (net) cum-interest. On 1st December, 2014 the company purchased the same loan $ 10,000 at par ex-interest. On 1st March, 2015 the company sold $ 10,000 face value of the loan at $ 95 ex-interest. The market price of the loan on 31st March, 2015 was $ 96. Draw up 9% Government Loan (2014) Account in the books of Bonanzaa Limited. First in first out method shall be followed and the balance of the loan held by the company shall be valued at total average cost or market price whichever is lower. Calculations shall be made to the nearest value or multiple thereof.
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