On 1 June 20X8, Ghana Company purchased $ 7,000,000 of Monaco Corporation 5.8% bonds, classified as an AC investment. The bonds pay semi- annual interest each 30 May and 30 November. The market interest rate was 6% on the date of purchase. The bonds mature on 30 May 20X13.
1. Calculate the price paid by Ghana Company.
2. Construct a table that shows interest revenue reported by Ghana, and the carrying value of the investment, for each interest period for four interest periods. Use the effective- interest method.
3. Give entries for 20X8, including the year- end accrual, based on your calculations in requirement 2.
4. How much interest income would be reported for the year ended 31 December 20X9? What would the balance of the investment account be at this time?