On January 1, 2018, Earthlight Corp. purchased 5% 6-year bonds with face value of $400,000. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
On January 1, 2018, Earthlight Corp. purchased 5% 6-year bonds with face value of $400,000. The bonds were dated January 1, 2018, and would mature on January 1, 2024. The bonds would pay interest on December 31 of each year. Earthlight paid S361,867 for the bonds to yield 7% (market rate). Earthlight accounted for the bonds at FV-OCI. Earthlight's fiscal year end was December 31. Fair values of the bonds on December 31, 2018, and 2019 respectively were: 2018 $325,648 2019 $399,408 a. Prepare a table to show interest income, interest received and premium or discount amortization for the bonds for each of the six years. Cash Received Interest Income Premium/discount FV-OCI Investment amortization b. Prepare all the necessary journal entries at the end of 2018, to record interest income and an adjustment to fair value. c. Prepare all the necessary journal entries at the end of 2019, to record interest income and an adjustment to fair value. On January 1, 2018, Earthlight Corp. purchased 5% 6-year bonds with face value of $400,000. The bonds were dated January 1, 2018, and would mature on January 1, 2024. The bonds would pay interest on December 31 of each year. Earthlight paid S361,867 for the bonds to yield 7% (market rate). Earthlight accounted for the bonds at FV-OCI. Earthlight's fiscal year end was December 31. Fair values of the bonds on December 31, 2018, and 2019 respectively were: 2018 $325,648 2019 $399,408 a. Prepare a table to show interest income, interest received and premium or discount amortization for the bonds for each of the six years. Cash Received Interest Income Premium/discount FV-OCI Investment amortization b. Prepare all the necessary journal entries at the end of 2018, to record interest income and an adjustment to fair value. c. Prepare all the necessary journal entries at the end of 2019, to record interest income and an adjustment to fair value.
Expert Answer:
Answer rating: 100% (QA)
Answer Requirement a Effective Interest rate annual Interest 6 bonds purchased at market rate of 7an... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas
Posted Date:
Students also viewed these accounting questions
-
A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $80 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of...
-
Thirsty Limited's business involves the bottling and distribution of a wide variety of carbonated soft drinks. Some drinks are developed internally, whilst other brands are purchased. The following...
-
Suppose a firm issued 1,000 bonds with face value of $1,000 and maturity of 10 years. The bond has 8% coupon and a callable option that can be exercised after 7 years at a call price $1,000.What is...
-
You have recently been hired as a consultant for a personal financial planning firm. One of your first projects is creating a retirement plan for a couple, Tom and Helena Keeley. They have just...
-
What are innovators? Early adopters? Laggards?
-
Many people know the mathematical constant p is approximately 3.14. But that's not exact. To be more precise, here are 20 decimal places: 3.14159265358979323846. Still not exact, though. In fact, the...
-
Develop an argument for the implementation of an HRIS using a risk reduction strategy and an organizational enhancement strategy.
-
In recent years, Jayme Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation...
-
The Paige Company wants to develop a cost equation to determine its total electricity cost for a given month. It has determined that kilowatt hours used is the best predictor of electricity cost. It...
-
The Sally Coffee Shop is considering closing one hour earlier in the evening through the week. Sally obtained the following data from a study taken last week of the number of customers between the...
-
Suppose that I'm standing on the ground and throw a rock into the air as hard as I can. The function Ht = 6 + 60t - 10t 2 models the rock's height above ground in feet after t seconds. For example,...
-
In the middle part of the semester we will deal with rotational motion. One of the common equations we will deal with in that unit is the following: 0 = 00 + wot + 1at where is the angle in radians...
-
If total assets decreased by $52,855 during a period of time and owner's equity increased by $27,441 during the same period, then the amount and direction (increase or decrease) of the period's...
-
As it travels around the curve, the car has constant speed 4. What is the change of velocity from point A to point B? 0=45 Incorrect Incorrecti- (1-2) (1+2) 2 Correct: -+ (1-2) j B Incorrect + (+2) 2...
-
A spring has a relaxed length of 26 cm (0.26 m) and its spring stiffness is 10 N/m. You glue a 70 gram block (0.070 kg) to the top of the spring, and push the block down, compressing the spring so...
-
Bigco Corporation is one of the nation's leading distributors of food and related products to restaurants, universities, hotels, and other customers. A simplified version of its recent income...
-
You are the marketing manager for Macy's. You are responsible for the Macy's day parade. If you invest $500,000 in producing the parade and if the gross margin for Macy's is 34%, how much business...
-
The Smiths buy a house. They borrow 80 percent of the purchase price from the local ABC Savings and Loan. Before they make their first payment, ABC transfers the right to receive mortgage payments to...
-
The projected benefit obligation was $80 million at the beginning of the year and $85 million at the end of the year. Service cost for the year was $10 million. At the end of the year, pension...
-
Distinguish between the direct method and the indirect method for reporting the results of operating activities in the statement of cash flows.
-
The following are summary cash transactions that occurred during the year for Hilliard Healthcare Co. (HHC): Cash Received from: Customers ........ $660,000 Interest on note receivables .. 12,000...
-
Comment on this statement: Dynamic modeling is about interaction.
-
Explain how objects interact by exchanging messages.
-
Describe the relationship between dynamic modeling, behavioral modeling, and structural modeling.
Study smarter with the SolutionInn App