MELON Company purchased 1,000,₱1,000, 10% , 5-year bonds of AVOCADO Company. The bonds are dated January 1, 2020 and pay interest every December 31. The bonds yield an 8% interest. The present value factors are as follows: PV of 1 at 8% for 5 periods - 0.68; PV of 1 at 10% for 5 periods - 0.62; PV of an annuity of 1 at 8% for 5 periods - 3.99; PV of annuity of 1 at 10% for 5 periods - 3.79. The bonds are quoted at 110 and 105 on December 31, 2020 and 2021 respectively. Assuming the business model of the company is to manage financial assets in order to collect contractual cash flows, what is the initial measurement of the investment in bonds on January 1, 2020?
MELON Company purchased 1,000,₱1,000, 10% , 5-year bonds of AVOCADO Company. The bonds are dated January 1, 2020 and pay interest every December 31. The bonds yield an 8% interest. The present value factors are as follows: PV of 1 at 8% for 5 periods - 0.68; PV of 1 at 10% for 5 periods - 0.62; PV of an annuity of 1 at 8% for 5 periods - 3.99; PV of annuity of 1 at 10% for 5 periods - 3.79. The bonds are quoted at 110 and 105 on December 31, 2020 and 2021 respectively. Assuming the business model of the company is to manage financial assets in order to collect contractual cash flows, what is the initial measurement of the investment in bonds on January 1, 2020?
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 16E
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MELON Company purchased 1,000,₱1,000, 10% , 5-year bonds of AVOCADO Company. The bonds are dated January 1, 2020 and pay interest every December 31. The bonds yield an 8% interest. The present value factors are as follows: PV of 1 at 8% for 5 periods - 0.68; PV of 1 at 10% for 5 periods - 0.62; PV of an annuity of 1 at 8% for 5 periods - 3.99; PV of annuity of 1 at 10% for 5 periods - 3.79. The bonds are quoted at 110 and 105 on December 31, 2020 and 2021 respectively. Assuming the business model of the company is to manage financial assets in order to collect contractual cash flows, what is the initial measurement of the investment in bonds on January 1, 2020?
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