On 1 January 20X5, Franco Ltd. purchased $480,000 of Gentron Company 7.00% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 8% on the date of purchase. The bonds mature on 31 December 20X10. The company has a 31 December year-end. Required: 1. Calculate the price paid by Franco Ltd. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.) Price paid 2. Assume that the bond is classified as an AC investment. Construct a table that shows interest revenue reported by Franco, and the carrying value of the investment, for four interest periods. Use the effective-interest method. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) Period 0 1 2 3 4 Cash Payment Interest Revenue Amortization Bond Carrying Val

On 1 January 20X5, Franco Ltd. purchased $480,000 of Gentron Company 7.00% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 8% on the date of purchase. The bonds mature on 31 December 20X10. The company has a 31 December year-end. Required: 1. Calculate the price paid by Franco Ltd. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.) Price paid 2. Assume that the bond is classified as an AC investment. Construct a table that shows interest revenue reported by Franco, and the carrying value of the investment, for four interest periods. Use the effective-interest method. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) Period 0 1 2 3 4 Cash Payment Interest Revenue Amortization Bond Carrying Val

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 15MCQ

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On 1 January 20X5, Franco Ltd. purchased $440,000 of Gentron Company 7.00% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 8% on the date of purchase. The bonds mature on 31 December 20X10. The company has a 31 December year-end. Required: 1. Calculate the price paid by Franco Ltd. (Do not round Intermediate calculations. Round your final answer to the nearest dollar amount.) Price paid Period 2. Assume that the bond is classified as an AC investment. Construct a table that shows interest revenue reported by Franco, and the carrying value of the investment, for four interest periods. Use the effective-interest method. (Do not round Intermediate calculations. Round your final answers to the nearest dollar amount.) 0 $ 1 2 3 4 Cash Payment 361,607 View transaction list Interest Revenue Amortization Bond Carrying Value 3. Prepare the entries for the first four interest periods based on your calculations in requirement 2. (If no entry is…
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