Question
1 ABC Company purchased $900,000 of 10% bonds of CBA Company on January 1, 2015, paying $846,225. The bonds mature January 1, 2025; interest is
1
ABC Company purchased $900,000 of 10% bonds of CBA Company on January 1, 2015, paying $846,225. The bonds mature January 1, 2025; interest is payable each July 1 and January 1. The discount of $53,775 provides an effective yield of 11%. ABC Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2015, ABC Company should report interest revenue from the CBA Company bonds of:
$93,078
None of these answers are correct
$90,000
$95,382
$93,169
2
Russell, Inc. acquired 30% of Dayton Corporation's voting stock on January 1, 2014 for $800,000. During 2014, Dayton earned $320,000 and paid dividends of $200,000. Russell's 30% interest in Dayton gives Russell the ability to exercise significant influence over Dayton's operating and financial policies. During 2015, Dayton earned $400,000 and paid dividends of $120,000 on April 1 and $120,000 on October 1. On July 1, 2015, Russell sold half of its stock in Dayton for $528,000 cash. What should be the gain on sale of this investment in Russell's 2015 income statement?
$110,000
None of these answers are correct
$98,000
$128,000
$80,000
3
Lakeshore Company purchased $2,000,000 of 8%, 5-year bonds from Rondon, Inc. on January 1, 2014, with interest payable on July 1 and January 1. The bonds sold for $2,083,160 at an effective interest rate of 7%. Using the effective-interest method, Lakeshore Company decreased the Available-for-Sale Debt Securities account for the Rondon, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums of $7,080 and $7,320, respectively. At December 31, 2014, the fair value of the Rondon, Inc. bonds was $2,120,000. What should Lakeshore Company report as other comprehensive income and as a separate component of stockholders' equity?
None of these answers are correct
$36,840
$14,400
No entry should be made
$51,240
4
Russell Company purchased $900,000 of 8%, 5-year bonds from Carpenter, Inc. on January 1, 2014, with interest payable on July 1 and January 1. The bonds sold for $937,422 at an effective interest rate of 7%. Using the effective interest method, Russell Company decreased the Available-for-Sale Debt Securities account for the Carpenter, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums of $3,186 and $3,294, respectively. At February 1, 2015, Russell Company sold the Carpenter bonds for $927,000. After accruing for interest, the carrying value of the Carpenter bonds on February 1, 2015 was $930,375. Assuming Russell Company has a portfolio of available-for-sale debt investments, what should Russell Company report as a gain (or loss) on the bonds?
$0
($26,433)
($3,375)
None of these answers are correct
($19,683)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started