Gamma Corp. invested in a three-year, $ 100 face value 6% bond, paying $ 105.55. At this

Question:

Gamma Corp. invested in a three-year, $ 100 6% bond, paying $ 105.55. At this price, the bond will yield a 4% return. Interest is payable annually.
(a) Prepare a bond premiun1 amortization table for Gamma Corp. assuming Gamma uses the effective interest method required by IFRS.
(b) Prepare journal entries to record the initial investment, the receipt of interest and recognition of interest income in each of the three years, and the of the bond at the end of the third year.
(c) Assuming Gamma Corp. applies ASPE and has chosen to use the straight-line method of amortization, determine the an10unt of premium that is amortized each year.
(d) Under the assumption in (c), prepare journal entries to record the initial investment, the receipt of interest and recognition of interest income in each of the three years, and the of the bond at the end of the third year. (e) Compare the total interest income under the two methods over the three-year period.
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...