On January 1, 2024, ABC Company issued $800,000 of its 20 year 10% bonds.The bonds were priced to yield 8%Interest is payable on June 30 and December 31.ABC, Company records interest expense at the effective rate and elected the option to report these bonds at their fair value.On June 30, 2024, the fair value of the bonds was $995,000 as determined by their market value in the over-the-counter market.General (risk-free) interest rates decline created a $25,000 increase in fair value.PV annuity: 5%, 40 = 17.15909PV annuity: 4%, 40 = 19.79277PV single sum: 5%, 40 = 14205PV single sum: 4%, 40 = 20829Required:a)Determine the price of the bonds on January 1, 2024.b) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry.

Bond issuance date Jan,1,2024 10% Bond -$ 800000 Yield 8% Interest is payable on 30 June and 31Dec…

equired: ) Determine the price of the bonds on January 1, 2024. ) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry

equired: ) Determine the price of the bonds on January 1, 2024. ) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 21E: On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be...

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Question

On January 1, 2024, ABC Company issued $800,000 of its 20 year 10% bonds.
The bonds were priced to yield 8%
Interest is payable on June 30 and December 31.
ABC, Company records interest expense at the effective rate and elected the option to report these bonds at their fair value.
On June 30, 2024, the fair value of the bonds was $995,000 as determined by their market value in the over-the-counter market.
General (risk-free) interest rates decline created a $25,000 increase in fair value.
PV annuity: 5%, 40 = 17.15909
PV annuity: 4%, 40 = 19.79277
PV single sum: 5%, 40 = 14205
PV single sum: 4%, 40 = 20829
Required:
a)
Determine the price of the bonds on January 1, 2024.
b) By how much will ABC Company's comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry.

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