Assume that on September 30, 2020, Manulife Financial paid 95.95 for (7 %) bonds of Hydro-Qubec as
Question:
Assume that on September 30, 2020, Manulife Financial paid 95.95 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 30,2025 . 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 2020.
3. Show how Manulife would report everything related to the bond investment on its balance sheet at December 31, 2020.
Step by Step Answer:
Financial Accounting
ISBN: 9780135433065
7th Canadian Edition
Authors: Walter Harrison, Wendy Tietz, C. Thomas, Greg Berberich, Catherine Seguin