Assume that on September 30, 2014, Manulife Financial paid 91 for 7% bonds of Hydro-Qubec as a

Question:

Assume that on September 30, 2014, Manulife Financial paid 91 for 7% bonds of Hydro-Québec as a long-term bond investment. The effective interest rate was 8%. The maturity value of the bonds will be $20,000 on September 30, 2019. The bonds pay interest on March 31 and September 30.

Requirements

1. What method should Manulife use to account for its investment in the Hydro-Québec bonds?

2. Using the effective interest method of amortizing the bonds, journalize all of Manulife's transactions on the bonds for 2014.

3. Show how Manulife would report everything related to the bond investment on its balance sheet at December 31, 2014.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...