Financial institutions hold large quantities of bond investments Suppose Sun Life Financial purchases $500,000 of 6 bonds of General Components Corporation for 88 on January 1, 2014, when the effective interest rate is 8 These bonds pay interest on January 1 and July 1 each year They mature on Janu...

Req 1 Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 2014 Jan 1 LongTerm Investment ...

Financial institutions hold large quantities of bond investments. Suppose Sun Life Financial purchases $500,000 of 6% bonds

Question:

Financial institutions hold large quantities of bond investments. Suppose Sun Life Financial purchases $500,000 of 6% bonds of General Components for 88 on January 1, 2014, when the effective interest rate is 8%. These bonds pay interest on January 1 and July 1 each year. They mature on January 1, 2022. At December 31, 2014, the market price of the bonds is 90.
Requirements
1. Journalize Sun Life's purchase of the bonds as a long-term investment on January 1, 2014 (to be held to maturity), receipt of cash interest and amortization of the bond investment on July 1, 2014, and accrual of interest revenue and amortization at December 31, 2014. Use the effective-interest method for amortizing the bond investment.
2. Show all financial statement effects of this long-term bond investment on Sun Life's and income statement at December 31, 2014.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...