Facts from A11-7: On 1 July 20X2, New Company purchased $600,000 of Old Corp. 5.5% bonds, classified as an AC investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase. The bonds mature on 30 June 20X5. Return to the facts of A11-7. Assume now that New Company is a private company that complies with ASPE. Straight-line amortization will be used rather than the effective-interest method. Required: Calculate the price paid by New Company. Construct a table that shows interest revenue reported by New Company, and the carrying value of the investment, for each interest period to maturity. Use the straight-line method. Give entries for the first three interest periods based on your calculations in requirement 2.
Facts from A11-7: On 1 July 20X2, New Company purchased $600,000 of Old Corp. 5.5% bonds, classified as an AC investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase. The bonds mature on 30 June 20X5.
Return to the facts of A11-7. Assume now that New Company is a private company that complies with ASPE. Straight-line amortization will be used rather than the effective-interest method.
Required:
-
Calculate the price paid by New Company.
-
Construct a table that shows interest revenue reported by New Company, and the carrying value of the investment, for each interest period to maturity. Use the straight-line method.
-
Give entries for the first three interest periods based on your calculations in requirement 2.
Step by step
Solved in 3 steps with 2 images
