Question 2 12 points Save As On January 2, 2018 Pearl corporation purchased 10%, $1,500,000 bonds...

 

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Question 2 12 points Save As On January 2, 2018 Pearl corporation purchased 10%, $1,500,000 bonds of Gold Company to yield 11%. The bonds are due December 31, 2027 and pay interest annually each December 31. Pearl intention is to generate profit from short-term differences in prices and accordingly, has classified the debt investment as trading. Following is a partial amortization schedule for these bonds extracted from Pearl's records: Date 1/2/18 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 AMORTIZATION SCHEDULE 10-Year, 10% Bonds Sold to Yield 11% Cash Received 0 $150,000 150,000 150,000 150,000 150,000 Interest Revenue 0 ??? 155,86 3 156,508 ??? 158,019 Discount Amortized 0 ??? 5,863 6,508 ??? 8,019 Carrying Amount of Bonds $1,411,655 ??? 1,422,800 1,429,308 ??? 1,444,551 Required: a) Calculate the missing numbers in the previous table for the years 2018 and 2021. b) Assume that the fair value of the bonds on December 31, 2020, is $1,440,000. Prepare the necessary adjusting entry. c) Show in proper format the effect on the income statement on December 31, 2020. d) Assume that on September 1, 2022, Pearl Corporation sold its Gold debt investment at 95: -Record the necessary amortization entry. - Calculate the gain or loss from the sale. -Calculate the total cash received by Pearl corporation. Question 2 12 points Save As On January 2, 2018 Pearl corporation purchased 10%, $1,500,000 bonds of Gold Company to yield 11%. The bonds are due December 31, 2027 and pay interest annually each December 31. Pearl intention is to generate profit from short-term differences in prices and accordingly, has classified the debt investment as trading. Following is a partial amortization schedule for these bonds extracted from Pearl's records: Date 1/2/18 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 AMORTIZATION SCHEDULE 10-Year, 10% Bonds Sold to Yield 11% Cash Received 0 $150,000 150,000 150,000 150,000 150,000 Interest Revenue 0 ??? 155,86 3 156,508 ??? 158,019 Discount Amortized 0 ??? 5,863 6,508 ??? 8,019 Carrying Amount of Bonds $1,411,655 ??? 1,422,800 1,429,308 ??? 1,444,551 Required: a) Calculate the missing numbers in the previous table for the years 2018 and 2021. b) Assume that the fair value of the bonds on December 31, 2020, is $1,440,000. Prepare the necessary adjusting entry. c) Show in proper format the effect on the income statement on December 31, 2020. d) Assume that on September 1, 2022, Pearl Corporation sold its Gold debt investment at 95: -Record the necessary amortization entry. - Calculate the gain or loss from the sale. -Calculate the total cash received by Pearl corporation.

Answer rating: 100% (QA)

Amort Sch Date Cash received Interest revenue Discount amortised Carrying amt of Bonds 1 2FV10 3Prev ... View the full answer