4. On May 1, 2016, Money Mart Company paid $180,000 to purchase $200,000 of bonds that...
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4. On May 1, 2016, Money Mart Company paid $180,000 to purchase $200,000 of bonds that carry a 5% contract rate of interest and will mature in 5 years from the date of purchase. Interest on the bonds is paid May 1 and November 1of each year. Gigajoule Company is a private company that prepares its financial statements in accordance with ASPE. It plans to hold the bonds until maturity and amortizes the premium or discount on bonds using the straight-line methodeach interest payment date. As of December 31, 2016, the bonds had a market value of $185,000. (20 marks) a. Prepare all necessary journal entries for 2016 dealing with the investment in bonds. b. Show how the bonds would be presented on the balance sheet dated December 31, 2016 c. How would be issuing more bonds affect the capital structure of Money Mart? How could it affect ROE of the company? 4. On May 1, 2016, Money Mart Company paid $180,000 to purchase $200,000 of bonds that carry a 5% contract rate of interest and will mature in 5 years from the date of purchase. Interest on the bonds is paid May 1 and November 1of each year. Gigajoule Company is a private company that prepares its financial statements in accordance with ASPE. It plans to hold the bonds until maturity and amortizes the premium or discount on bonds using the straight-line methodeach interest payment date. As of December 31, 2016, the bonds had a market value of $185,000. (20 marks) a. Prepare all necessary journal entries for 2016 dealing with the investment in bonds. b. Show how the bonds would be presented on the balance sheet dated December 31, 2016 c. How would be issuing more bonds affect the capital structure of Money Mart? How could it affect ROE of the company?
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Financial Accounting Information for Decisions
ISBN: 978-1259533006
8th edition
Authors: John J. Wild
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