For the next (3) three questions:On June 1, 2022, GHI Co. acquired P3,000,000 bonds of Z Company at 102 plus transaction costs ofP150,000. The bonds will be accounted as a financial asset at fair value through profit or loss. The bondspay interest of 11% every May 30 starting in 2023 and will mature on May 31, 2025. The fair value ofthe bonds (clean price) at year-end are presented below:December 31, 2022December 31, 2023December 31, 2024991039810. What is the net effect on the income statement of the investment in bonds for 2022? (Indicate if increaseor decrease)11. What is the carrying value of the investment in bonds on December 31, 2022?12. All of the bonds were sold at fair value on December 31, 2023. The total cash to be received from thesale of the investment is:

Answered: Image /qna-images/answer/46d2032b-edc8-42fd-969c-a98a4170c58b.jpg

For the next (3) three questions: On June 1, 2022, GHI Co. acquired P3,000,000 bonds of Z Company at 102 plus transaction costs of P150,000. The bonds will be accounted as a financial asset at fair value through profit or loss. The bonds pay interest of 11% every May 30 starting in 2023 and will mature on May 31, 2025. The fair value of the bonds (clean price) at year-end are presented below: 99 December 31, 2022 December 31, 2023 December 31, 2024 103 98 10. What is the net effect on the income statement of the investment in bonds for 2022? (Indicate if increase or decrease) 11. What is the carrying value of the investment in bonds on December 31, 2022? 12. All of the bonds were sold at fair value on December 31, 2023. The total cash to be received from the sale of the investment is:

For the next (3) three questions: On June 1, 2022, GHI Co. acquired P3,000,000 bonds of Z Company at 102 plus transaction costs of P150,000. The bonds will be accounted as a financial asset at fair value through profit or loss. The bonds pay interest of 11% every May 30 starting in 2023 and will mature on May 31, 2025. The fair value of the bonds (clean price) at year-end are presented below: 99 December 31, 2022 December 31, 2023 December 31, 2024 103 98 10. What is the net effect on the income statement of the investment in bonds for 2022? (Indicate if increase or decrease) 11. What is the carrying value of the investment in bonds on December 31, 2022? 12. All of the bonds were sold at fair value on December 31, 2023. The total cash to be received from the sale of the investment is:

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

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1MC

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On January 1, 2019, Brewster Company issued 2,000 of its 5-year, 1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Brewster uses the effective interest method of amortization. On December 31, 2023, Brewster extinguished the 2,000 bonds early through acquisition in the open market for 1,980,000. On July 1, 2022, Brewster issued 5,000 of its 6-year, 1,000 face value, 10% convertible bonds dated July 1 at an effective annual interest rate (yield) of 12%. The bonds are convertible at the option of the investor into Brewsters common stock at a ratio of 10 shares of common stock for each bond. Brewster uses the effective interest method of amortization. On July 1, 2023, an investor in Brewsters convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of Brewsters common stock, which had a market value of 105 per share at the date of the conversion. Required: 1. Using the information about Brewster, answer the following questions: a. Were the 11% bonds issued at par, at a discount, or at a premium? Why? b. Is the amount of interest expense for the 11% bonds using the effective interest method of amortization higher in the first or second year of the life of the bond issue? Why? 2. Using the information about Brewster, explain the following: a. How is a gain or loss on early extinguishment of debt determined? Does the early extinguishment of the 11% bonds result in a gain or loss? Why? b. How does Brewster report the early extinguishment of the 11% bonds on the 2023 income statement? 3. Based on the information provided about Brewster, answer the following questions: a. Does recording the conversion of the 10% convertible bonds into common stock under the book value method affect net income? What is the rationale for the book value method? b. Does recording the conversion of the 10% convertible bonds into common stock under the market value method affect net income? What is the rationale for the market value method?
Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest. On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-years bonds with a face value of 12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to record the purchase of these available-for-sale securities.
During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows: The net holding gain or loss included in Anthonys income statement for the year should be: a. 0 b. 3,000 gain c. 9,000 loss d. 12,000 loss
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.
Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 2016, Parilo Company sold 50,000 of the bonds for 96. Journalize entries to record the following: a. The initial acquisition of the bonds on May 1. b. The semiannual interest received on November 1. c. The sale of the bonds on November 1. d. The accrual of 1,000 interest on December 31, 2016.
Irving Inc. sold bonds with a $50,000, 10% interest, and 10-year term at $52,000. What is the total amount of interest expense over the life of the bonds?