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a. Explain the term contingencies with examples, and the reporting procedures to report contingencies. (1 mark) (minimum 300 words) b. Explain how interest rates affect
a. Explain the term contingencies with examples, and the reporting procedures to report contingencies. (1 mark) (minimum 300 words) b. Explain how interest rates affect the price of bonds. (1 mark) c. Case: If Muscat company has bonds outstanding during a year in which market rate of interest has increase. If Muscat has elected fair value option for the bonds, will it report a gain or a loss on the bonds for the year. Explain. (1 mark) (b+s minimum 300 words) a. On May 31st, 2020, Ford company purchased a long-term investment related to Motro Company for $12 million as trading securities, of 8% quoted bonds. On the same date the business acquired $15 million of Cora Company shares as available for sale security and purchased Treasury bonds for $3 million, from Samsuc Company hoping to generate profit in short period of time. b. On November 15th, 2020, Ford company sold the Samsuc Treasury bonds for $4 million. c. On December 31st, 2020, record the necessary adjusting entry(s) and closing entries related to the investments. The market prices of the investments are: Motro Company $11.5 million Cora Company $16 million Samsuc Company $5 million Required: a. Record the necessary adjusting entries. (1 mark) b. Indicate any amounts that Ford would report in its 2020 statement of financial position and income statement as result of these investments. (1 mark)
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