Question: On 1 January 20X2 Lucky Company purchased 5 000 000 of

On 1 January 20X2, Lucky Company purchased $ 5,000,000 of Fire Corporation 3% bonds, classified as an AC investment. The bonds pay semi- annual interest each 30 June and 31 December. The market interest rate was 4% on the date of purchase. The bonds mature on 30 December 20X11. At the end of 20X2, the bonds had a fair value of $ 4,800,000.

1. Calculate the price paid by Lucky Company.
2. Construct a table that shows interest revenue reported by Lucky for the first two interest periods. Use the effective- interest method.
3. Give entries for the first year assuming that the investment is classified as FVTPL.

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  • CreatedFebruary 17, 2015
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