Problem 2 - Ruby CompanyIn auditing the books of Ruby Company as of December 31, 2022, before the accounts were closed, you find the investment account balance: INVESTMENT IN PEARL 9% BONDS (DUE DATE JUNE 1, 2027)DateItemDebitCreditBalanceJan. 20Bonds, P500,000 par acquired at 102 plus accrued interest517,500 517,500Mar. 01Proceeds from sale of bonds, P100,000 face and accrued interest 106,000411,500June 1Interest Received 18,000393,500Nov. 01Amount received on call of bonds, P100,000 face, at 101 and accrued interest 104,750288,750Dec. 1Interest Received 13,500275,250 During the course of your audit procedures:The company uses the nearest month method in the computation of interest.The bonds were originally dated December 1, 2021, but the bonds were purchased on January 20, 2022.The investments were held for trading purposesThe interest are receivable semi-annually, every June 1 and December 1.Pearl 9% bonds were quoted at par as of December 31, 2022. Question 1: How much is the interest income for the year 2022? Question 2: The net gain or (loss) on sale for 2022 amounts to? (Use negative sign if net loss) Question 3: The correct amount of investment in Pearl that should be presented in the balance sheet as of December 31, 2022 is?

Bond is a financial instrument which is used for making an investment by investor and raising…

Answered: Problem 2 - Ruby Company In auditing…

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

ChapterD: Investments

Section: Chapter Questions

Problem D.2EX: Entries for investment in bonds, interest, and sale of bonds Parilo Company acquired 170,000 of...

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Problem 2 - Ruby Company

In auditing the books of Ruby Company as of December 31, 2022, before the accounts were closed, you find the investment account balance:

INVESTMENT IN PEARL 9% BONDS (DUE DATE JUNE 1, 2027)

Date	Item	Debit	Credit	Balance
Jan. 20	Bonds, P500,000 par acquired at 102 plus accrued interest	517,500		517,500
Mar. 01	Proceeds from sale of bonds, P100,000 face and accrued interest		106,000	411,500
June 1	Interest Received		18,000	393,500
Nov. 01	Amount received on call of bonds, P100,000 face, at 101 and accrued interest		104,750	288,750
Dec. 1	Interest Received		13,500	275,250

During the course of your audit procedures:

The company uses the nearest month method in the computation of interest.
The bonds were originally dated December 1, 2021, but the bonds were purchased on January 20, 2022.
The investments were held for trading purposes
The interest are receivable semi-annually, every June 1 and December 1.
Pearl 9% bonds were quoted at par as of December 31, 2022.

Question 1: How much is the interest income for the year 2022?

Question 2: The net gain or (loss) on sale for 2022 amounts to? (Use negative sign if net loss)

Question 3: The correct amount of investment in Pearl that should be presented in the balance sheet as of December 31, 2022 is?

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