On January 1, Ralston Corp. issues $800,000 of 8% bonds, due in 10 years, with interest payable

Question:

On January 1, Ralston Corp. issues $800,000 of 8% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Price Investment Company purchases all of the bonds and classifies them as available-for sale.


Required:

Assuming the market interest rate on the issue date is 9%, Price will purchase the bonds for $747,968.

1. Complete the first three rows of an amortization table for Price.

2. Record the purchase of the bonds by Price on January 1 and the receipt of the first two semiannual interest payments on June 30 and December 31.

3. Assume the fair value of the bonds equals $750,000 on December 31. Record any necessary fair value adjustment.

4. Calculate net income and comprehensive income. Assume the company has sales revenue of $2,600,000 and operating expenses of $1,400,000.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Accounting

ISBN: 978-1259914898

5th edition

Authors: David Spiceland, Wayne M. Thomas, Don Herrmann

Question Posted: