Answered: interest inco

Business

Accounting

interest inco

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 1RE

See similar textbooks

Related questions

Q: On January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 for…

A: NOTE : As per BARTLEBY guidelines, when multiple questions are given then first question is to be…

Q: On January 1, 2018, CHE Co. purchased 12% bonds, having a maturity value of P800,000, for P860,652…

Q: On January 1, 2020, Blossom Company purchased $310,000, 6% bonds of Aguirre Co. for $284,855. The…

A: Under the effective interest method of amortization of discount or premium, the difference between…

Q: On January 1,2020, Jerry Conpany acquired P6,000,000 of 12% face value bonds at P5,650,500 to be…

A: Annual interest payment =face value of bonds x rate of interest x year = P6,000,000 x 12% x 1 year =…

Q: On January 1, 2018, an entity purchased bonds with face amount of P5,000,000. The entity paid…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: On January 1, 2019, ZZZ Company purchased bonds with face amount of P5,000000. The entity paid…

A: Bonds refers to the financial instrument issued in the market to collect the funds. Interest is paid…

Q: On January 1, 2019, Lasagna Company purchased 3,000, P1,000 face value term bonds with a stated rate…

A: Here discuss about the details of Valuation of Bond and its changes as in the reclassification as…

Q: On January 1, 2019, Peter Corporation purchased a debt instrument at its face value of P3,000,000.…

A: Reclassification of Debt Instrument As a result debt securities may be reclassified from the…

Q: On January 1, 2019, La Vida Company purchased 3,000, P1,000 face value term bonds with a stated rate…

A: Reclassification is when business entity changed business model for managing its financial assets.…

Q: Record the purchase of the bonds. 2. Prepare an investment interest income and discount amortization…

A: 1. Below is the Journal Entry for the Purchase of the Bonds Date Particulars Debit Credit…

Q: Megan, Inc., sold $500,000 of its 9%, five-year bonds dated January 1, 2018, on May 1, 2018, for…

A: Bonds are considered a financial instrument used to raise finance for the organization. It is also…

Q: On January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 for…

A: Step 1 Journal is the Part of Book Keeping.

Q: 9. On January 1, 2020, HIBISCUS Company purchased 4,000 of P1,000 face value, 10% bonds of IXORA…

A: Bonds are the debt security which is offered or issued by the corporates or the governments to…

Q: On October 1, 2021, Complex Company purchased a 12% P3,000,000 face amount-bond issue for P2,700,000…

A: A bond is a fixed interest bearing debt instrument issued by a company to finance its operation.…

Q: On January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker's…

A: Discount on company’s bonds = 500000-475126= 24874 interest =8% x 500000 = 40000 interest income at…

Q: January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker’s…

A: Solution Given Face value 500000 Coupon rate 8% Issue price 475126 Life of…

Q: On January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker’s…

A: Year Cash flows (I) pvf @9% (II) (I)*(II) 2020 40000 0.9174 36696 2021 40000 0.8417 33668 2022…

Q: On January 1, 2017, KLM Company purchased bonds with face amount of 5,000,000. The entity paid…

A: GIVEN On January 1, 2017, KLM Company purchased bonds with faceamount of 5,000,000. The entity…

Q: On October 1, 2019, Kite Corporation purchased a debt security having a face value of P3,000,000…

A: Investment in debt securities is the investment in the debenture of the company which is a debt for…

Q: On January 1, 2020, Soledad Company purchased 10% bonds with face amount of P3,000,000. The bonds…

A: Profit or loss on reclassification is the difference between the revised carrying value and…

Q: anuary 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker’s commission…

A: The comprehensive statement income includes all those unrealized income or losses which can not be…

Q: Haiti Company purchased 5,000 bonds per ₱1,000 face amount, 10% bonds to yield 12%. The carrying…

A: The gain amount which an investor will get after buying a bond is the function of the purchase…

Q: Journal entry to record the second period of interest, June 30, Matrix would record a credit to…

A: Given information is: On January 1, 2019, Matrix, Inc. purchased as an investment OMR 22,000, of 9%,…

Q: On January 1, 2020, Sage Company purchased $270,000, 6% bonds of Aguirre Co. for $248,099. The bonds…

A: The procedure of recording business transactions for the first time in the books of accounts is…

Q: On January 1, 2020, HIBISCUS Company purchased 4,000 of ₱1,000 face value, 10% bonds of IXORA…

A: The coupon interest rate is always paid on the face value of the bonds and is independent of the…

Q: On January 1, 2019, ZZZ Company purchased bonds with face amount of P5,000000. The entity paid…

Q: Described below are certain transactions of Jeno Corporation during 2022. 1. On April 1, the…

A: The process of accounting consists of a set of activities that pertain to the recording of every…

Q: On January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker’s…

A: Given as, Face value 500000 Coupon rate 8% Issue price 475126 Life of bond 3…

Q: January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker's…

A: A financial asset is an asset, the value of which is extracted from a contractual obligation.…

Q: . On January 1, 2020, HIBISCUS Company purchased 4,000 of ₱1,000 face value, 10% bonds of IXORA…

A: Given Data: Face value of bonds = 4,000 bonds at ₱ 1,000 Par value = ₱ 4,000,000 Carrying value of…

Q: On January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 for…

A: Where investment are classified as FVTPL, then initially the investments are recorded Fair Value .…

Q: On January 1, 2019, Davao de Oro Company purchased bonds with a face amount of P5,000,000. The…

A: Bond amortization schedule (effective interest…

Q: n January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker's…

A: Solution Given Face value 500000 Coupon rate 8% Issue price 475126 Life of…

Q: On January 1, 2019, ZZZ Company purchased bonds with face amount of P5,000000. The entity paid…

A: SOLUTION- Bonds refers to the financial instrument issued in the market to collect the funds.…

Q: On January 1, 2021, Illuminati Company purchased 10% bonds with a face amount of P3,000,000. Th…

A: Computation of carrying amount of bonds on december 31,2022: Amount Interest income Interest…

Q: On July 01, 2019, SALUDO RAW SA'YO SI MAGELLAN SABI NI LOLA CO. received P1,032,880 for P1,000,000…

A: Market rate of interest = 10%/2 Market rate of interest = 5%

Q: On January 1, 2019, Davao de Oro Company purchased bonds with a face amount of P5,000,000. The…

A: On 01.01.2019, Davao de Oro company purchased bonds of face amount = P5000000 Entity paid = P4600000…

Q: On June 1, 2020, LM company purchased debt investment at amortized cost, 8,000 of P1,000 face value…

A: Investment in bonds: Investment in bonds is the scenario where the company acquires bonds either at…

Q: On January 1, 2020, Soledad Company purchased 10% bonds with face amount of P3,000,000. The bonds…

A: NOTE : As per BARTLEBY guidelines, when multiple questions are given, then first question is to be…

Q: On October 1, 2021, Valorant Company purchased a debt security having a face value of P3,000,000…

A: In case of investment in debt security is measured at FVTOCI ,initially the investment should…

Q: On January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker's…

A: Fair value of the Bond = P500,000 Financial asset in our question is measured at FVTPL. Any change…

Q: On January 1, 2020, Ye Company purchased 8% bonds in the face amount of P4,000,000. The bonds mature…

A: If the entity changes their classification from FVOCI to FVTPL then the unrealized gain/ loss are…

Q: On January 1, 2020, HIBISCUS Company purchased 4,000 of ₱1,000 face value, 10% bonds of IXORA…

A: Bond Bond is a source of finance issued by the firm to raise money. It has a fixed Interest rate…

Q: loyd Limited had the following transactions pertaining to debt investments. Jan. 1, 2020 Purchased…

A: Interest = Bond x Interest rate x Time

Q: nds is 9% on December 31, 2020. Round off present value factors to four (4). decimal places and…

A: The answer has been mentioned below.

Q: On January 1, 2019, ZZZ Company purchased bonds with face amount of P5,000000. The entity paid…

Q: On January 1, 2020 Chicken Wings Company purchased P3,000,000, 8% bonds of Fried Chicken Corporation…

A: Chicken Wings purchased bonds n which generated two types of return to it. First, Chicken wings…

Q: On January 1, 2020, Blue Company purchased P500,000 8% bonds for P475,126 (including broker's…

A: Working note: Computation of effective rate of interest:

Q: On July 1, 2019, Prime Company borrowed P320,000 to purchase 80% of the outstanding common stock of…

A: On 01.07.2019, Prime company borrowed amount = P320000 This amount is borrowed to purchase the…

Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

On January 1, 2020, JASMINE Company purchased 4,000 of ₱1,000 face value, 10% bonds of IXORA Company for ₱4,270,600. The bonds will mature on January 1, 2025 and pay interest semi-annually on January 1 and July 1. Bonds effective interest rate is 8%. JASMINE has a business model of collecting all the contractural cash flows related to the instrument. How much should JASMINE report as interest income for the year ended December 31, 2020 on the bonds?

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

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

On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000
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?
On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10% interest rate. Each annual payment is in the amount of $39,569 and payment is due each Dec. 31. What is the journal entry on Jan. 1 to record the cash received and on Dec. 31 to record the annual payment? (You will need to prepare the first row in the amortization table to determine the amounts.)
Investments On October 4, 2019, Collins Company purchased 100 bonds of Steph Company for 6,400 as a short-term investment in securities classified as available for sale. On December 31, 2019, the bonds had a fair value of 6,300, and on February 8, 2020, Collins sold the bonds for 6,700. Required: In journal entry form, prepare the spreadsheet entries to record these transactions for Collins Companys 2019 and 2020 statement of cash flows.
Whirlie Inc. issued $300,000 face value, 10% paid annually, 10-year bonds for $319,251 when the market of interest was 9%. The company uses the effective-interest method of amortization. At the end of the year, the company will record ________. A. a credit to cash for $28,733 B. a debit to interest expense for $31,267 C. a debit to Discount on Bonds Payable for $1,267 D. a debit to Premium on Bonds Payable for $1.267