ew Ro... 12 " A B I ULAA Ev Eve A Q2. a) RHS Financial Grouppaid $500,000 for a 25% investment in the common shares of Silk Corporation. For the first year, Silk reported net income of $200,000 and at year-end declared and paid cash dividends of $100,000. On the balance sheet date, the fair value of RHS Financial Group's investment in Silk Corporation shares was $384,000. Requirements: a) Which method is appropriate for RHS Financial Group to use in accounting for its investment in Skill Corporation? Why? b) Show everything that RHS Financial Group would report for the investment and any investment revenue in its year-end financial statements. I Tell me what you want to do mes New Ro. 12 A A B I UDA A EEE A b) Suppose BMO issued a six-year $10,000 bond with stated interest rate of 6.25% when the market interest rate was 6.25%. Assume that the accounting year of BMO ends on October 31. Journalize the following transactions, including an explanation for each entry. a) Issuance of the bond, payable on May 1, 2014 b) Accrual of interest expense on October 31, 2014 (rounded to the nearest dollar) c) Payment of cash interest on November 1, 2014 d) Payment of the bonds at maturity (give the date) Answer: h (Canada) n