Aeron Inc. purchased a 10-year bond from Beedle Company on 1/1/20X6. The bonds have a 6%...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Aeron Inc. purchased a 10-year bond from Beedle Company on 1/1/20X6. The bonds have a 6% annual interest rate and pay interest semi-annually on June 30 and December 31. The market rate of interest on 1/1/20x6 for bonds of similar risk was 5% (annual). The face value of the bonds purchased was $200,000. The fair value of the bonds of the bonds at December 31 was as follows: $ 213,200 12/31/20x6 $ 213,300 12/31/20X7 $ 212,000 12/31/20x8 Part 1. Assume Aeron does not make any special elections regarding the reporting of the bonds. Aeron intends to hold the bonds for 3 or 4 years, before selling them. Aeron prepares annual financial statements and completes any mark-to- market adjusting entries at the end of the year. Assume Aeron has $50,000 of net income before considering ANY of the bond transactions. Aeron has no OCI (other comprehensive income) before considering any of the bond transactions. (Ignore taxes for all of these questions.) 1. Compute the issue price of the bonds. Show and label any computations or steps (for possible partial credit). 2. Complete an amortization schedule through 20X9 (8 payments) for the bonds in excel. Round (or truncate) dollar figures to the nearest dollar. 3. Show the journal entry recorded by Aeron on 1/1/20X6 4. Show the journal entry recorded by Aeron 6/30/20x6. 5. Show any journal entries required on 12/31/20x6. 6. What will Aeron report as net income for 20X6 with the bond transactions included? 7. What will Aeron report as Comprehensive income for 20X6 with the bond transactions included? 8. Record any mark-to-market adjustment that would be recorded on 12/31/2007. Say N/A if an adjustment is not needed. Part 2. Assume Aeron does not make any special elections regarding the reporting of the bonds. Aeron intends to hold the bonds until maturity. (Ignore taxes for all of these questions.) 9. At what amount does Aeron report the investment on the 12/31/20x6 balance sheet? 10. Assume Aeron has $50,000 of net income before considering ANY of the bond transactions. Aeron has no OCI (other comprehensive income) before considering any of the bond transactions. a. What will Aeron report as net income for 20x6 with the bond transactions included? b. What will Aeron report as Comprehensive income for 20X6 with the bond transactions included? Part 3. Assume Aeron makes the fair value election for the reporting of the bonds. Aeron intends to hold the bonds until maturity. Assume Aeron has $50,000 of net income before considering ANY of the bond transactions. Aeron has no OCI (other comprehensive income) before considering any of the bond transactions. Ignore any taxes. 11. What will Aeron report as net income for 20X6 with the bond transactions included? 12. What will Aeron report as Comprehensive income for 20X6 with the bond transactions? Part 4. Assume the facts in Part 2. 13. Show the journal entry that would be recorded in the bonds were sold for $212,000 on 1/1/20x9. (Do not record any amortization for the 1-day of 20X9) 14. Will any gain or loss recorded in the transaction above be part of net income or other comprehensive income? Aeron Inc. purchased a 10-year bond from Beedle Company on 1/1/20X6. The bonds have a 6% annual interest rate and pay interest semi-annually on June 30 and December 31. The market rate of interest on 1/1/20x6 for bonds of similar risk was 5% (annual). The face value of the bonds purchased was $200,000. The fair value of the bonds of the bonds at December 31 was as follows: $ 213,200 12/31/20x6 $ 213,300 12/31/20X7 $ 212,000 12/31/20x8 Part 1. Assume Aeron does not make any special elections regarding the reporting of the bonds. Aeron intends to hold the bonds for 3 or 4 years, before selling them. Aeron prepares annual financial statements and completes any mark-to- market adjusting entries at the end of the year. Assume Aeron has $50,000 of net income before considering ANY of the bond transactions. Aeron has no OCI (other comprehensive income) before considering any of the bond transactions. (Ignore taxes for all of these questions.) 1. Compute the issue price of the bonds. Show and label any computations or steps (for possible partial credit). 2. Complete an amortization schedule through 20X9 (8 payments) for the bonds in excel. Round (or truncate) dollar figures to the nearest dollar. 3. Show the journal entry recorded by Aeron on 1/1/20X6 4. Show the journal entry recorded by Aeron 6/30/20x6. 5. Show any journal entries required on 12/31/20x6. 6. What will Aeron report as net income for 20X6 with the bond transactions included? 7. What will Aeron report as Comprehensive income for 20X6 with the bond transactions included? 8. Record any mark-to-market adjustment that would be recorded on 12/31/2007. Say N/A if an adjustment is not needed. Part 2. Assume Aeron does not make any special elections regarding the reporting of the bonds. Aeron intends to hold the bonds until maturity. (Ignore taxes for all of these questions.) 9. At what amount does Aeron report the investment on the 12/31/20x6 balance sheet? 10. Assume Aeron has $50,000 of net income before considering ANY of the bond transactions. Aeron has no OCI (other comprehensive income) before considering any of the bond transactions. a. What will Aeron report as net income for 20x6 with the bond transactions included? b. What will Aeron report as Comprehensive income for 20X6 with the bond transactions included? Part 3. Assume Aeron makes the fair value election for the reporting of the bonds. Aeron intends to hold the bonds until maturity. Assume Aeron has $50,000 of net income before considering ANY of the bond transactions. Aeron has no OCI (other comprehensive income) before considering any of the bond transactions. Ignore any taxes. 11. What will Aeron report as net income for 20X6 with the bond transactions included? 12. What will Aeron report as Comprehensive income for 20X6 with the bond transactions? Part 4. Assume the facts in Part 2. 13. Show the journal entry that would be recorded in the bonds were sold for $212,000 on 1/1/20x9. (Do not record any amortization for the 1-day of 20X9) 14. Will any gain or loss recorded in the transaction above be part of net income or other comprehensive income?
Expert Answer:
Answer rating: 100% (QA)
Depreciation Expense of Subsidary Cost 160000 087 vreful life Salavage value Straight line dep... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
1. Hannah is applying for a life policy on her girlfriend Sarahs life. The policy is $500,000 and carries a large premium. Hannah is the main earner, so she is concerned about not being able to pay...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
The inequality describes the range of monthly average temperatures T in degrees Fahrenheit at a certain location. (a) Solve the inequality. (b) If the high and low monthly average temperatures...
-
When financial institutions discover that their ISs (especially databases) have been broken into, they often do not report the event to law enforcement officers. Even if they know who the hacker is,...
-
Anastasia, Emma, and Greta are deciding what to do on a weekend getaway. They each suggest a first, second, and third choice and then vote on the options. Table 18.2 shows their first, second, and...
-
Engineers are often accused of having a narrow view of problems, and are claimed to lack skills to deal with ambiguity. In what ways might an engineering manager differ in this regard?
-
State Senator Bowdler convinced the legislature of State Z to pass a law requiring all professors to submit their class notes and transparencies to a board of censors to be sure that no lewd...
-
Find the inverse of the given matrix A using Gauss-Jordan elimination. -15 45 -3 4 55 -164 15 -15 A = -215 640 -62 59 -4 12 01
-
For the network of Fig. 7.105, determine: a. IDQ and VGSQ b. VDS c. VD. DO GS (Th) (on) = 4 mA GS
-
Write a Individual Reflective Journal on the two widely used practices in preparing budgets are top down budgeting and bottom up budgeting 1. Reflections on Use of Budgeting as a management technique...
-
In mechanics, material properties are established based on the logic of relating deformations to externally applied forces. Depending on the properties of interest, various ways of applying external...
-
Conduct the force analysis of the structure for the given set of loads (shown in Figure 1), a provide the following: 1) Axial forces in all truss elements 2) Normal force, shear force, and moment...
-
Use Gaussian estimation and show all processes. 2x Show that the function T: R R2 is not a linear transformation: T T(*)) = [*1] + 20 Determine if the linear transformation T: Rm R" given by T(x) =...
-
The following information is available for a businesses for the Year 1 accounting year. Hopkins CPAs is a service business that provides accounting services to small businesses. Data for Hopkins CPAs...
-
Assume that you have bought BHP October 49 some time ago when the common share price was $46, the strike price of the call is $49 and each call costs you $3 (column 1). The 2nd column gives data for...
-
Tales from the grave: Opposing autopsy reports from a body exhumed 1. Introduction Exhumations in criminal cases are rare, but on occurrence they can resolve issues that are either overlooked or...
-
Suppose that a company has 10.000 outstanding shares in the beginning of the year. On April 1st, the company increases its shares by 6.000. On July 1st, the company increases its shares again, but...
-
Use the same information from E10- 9 now assuming that All- Kinds- of- Cases Company is an IFRS reporter. In the 10-9 Required a. Conduct a lower- of- cost- or- market test for All- Kinds-of-Cases,...
-
Error Correction, after Books Closed. Tyrion Retailers, Inc. incorrectly recorded inventory in 2014. Rather than recording ending inventory as $ 570,000, Tyrions accounting manager entered $ 750,000....
-
Lyon Company has the following transactions in the current year. Assuming that all of the transactions are material, which of them will most likely have no effect on current year net income? a. The...
-
Find the relationship of the eight SU(3) operators \(T_{ \pm}, V_{ \pm}, U_{ \pm}, T_{3}\), and \(Y\) defined in Eqs. (8.2) and (8.7)-(8.8), and the nine oscillator operators \(\left(A_{i}^{j}...
-
Verify that the set of matrices (5.14) is closed under ordinary matrix multiplication. Data from Eq. 5.14 T(oc)= = 629 > - (+19) TOO) = (721) TO) = ( ). T(oa)= T(b) TO) -(11) T(4-(11) TO=(9) T(C3)= =
-
(a) Show that the most general \(2 \times 2\) unitary matrix with unit determinant can be parameterized as in Eqs. (6.76) and (6.77). (b) Take the group identity element \(U(1,0,0,0)\) to correspond...
Study smarter with the SolutionInn App