On January 1, 2017, Tusk Company issued $300 million of bonds with a 6% coupon interest rate.

Question:

On January 1, 2017, Tusk Company issued $300 million of bonds with a 6% interest rate. The bonds mature in 10 years and pay interest annually on December 31 of each year. The market rate of interest on January 1, 2017, for bonds of this risk class was 6%. Tusk
Company closes its books on December 31. Tusk elected the fair value option under ASU 2016-1 to account for the bonds.
Required:
1. What amount will appear for the bonds on Tusk Company's on January 1,
2017?
2. What journal entries will Tusk Company make during 2017 to record the effects of the bonds if the market interest rate for these types of bonds is 9% at December 31, 2017?
3. How would your answer change if the increase in interest rate were due to deteriorating financial conditions?
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... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...