Can someone please explain in neat form how they got this amortization table.
nvestment All-9 Amortized cost versus fair value- debt investment: onl may 20X7, Bertrum limited purchased $1,000,000 of fox Corp. 6.2 % bonds classified as an Ac investment. The bonds pay semi- annual interest each 1 may and I November. The market interest rate was 6 % on the data of purchase the bonds mature on I November 20X11 Required: a. Calculated the price paid by Bertram limited. Solution: Principal $1,000,000 x (P/F, 3 % 9 ) (.76642) $ 766,420 Interest $31,000 (P/A, 3 %, 9) (7.78611) 241.369 S1007.789 Fair valuc $1,000,000 x 6.2 % x 6/12 b. Construct a table that shows interest revenue reported by Bertrum, and the carrying value of the investment, for each interest period to maturity. Use the effective- interest method. Solution: Effective interest amortization 3% Cash Interest Revenue Bond Period Payment Carrying Value Amortization C $1,007,789 S766 $31,000 S30,234 1,007,023 1,006,234 31,000 30,211 789 31,000 30,187 813 1,005.421 4 31,000 30,163 837 1,004,584 30,138 1,003,722 31,000 862 888 31,000 30,112 1,002.834 31,000 30.085 915 1,001,919 30.058 942 31,000 1,000,977 30,023 1000,000 977 31,000 $30,029 $6 rounding error e. Give entries for 20X7 and 20X8 for bertrum limited, including adjusting entries at the year- end which is 31 December Solution: 20x7 entries 1 May Investment in debt securities: Fox Corp. bonds Cash 1,007.789 1,007,789 1 November Cash 31.000 Investment in debt securities: Fox Corp. Bonds. Investment revenue: Interest 31 December Interest receivable (2/6 of $31,000]. Investment in debt securities: Fox Corp. bonds (2/6 of $789). Investment revenue: Interest (2/6 of $30,211). 20x8 entries I May 766 30,234 10,333 263 10,070 Cash 31,000 Investment in debt securities: Fox Corp. bonds (4/6 of $789). Interest receivable.. Investment revenue: Interest (4/6 of $30,2 11). ..526 10,333 ....20,141 1November Cash . 31,000 Investment in debt securities: Fox Corp. bonds.... Investment revenue: Interest... 31 December Interest receivable (2/6 of $31,000)... Investment in debt securities: Fox Corp. bonds (2/6 of $837) Investment revenue: Interest (2/6 of $30,163)... d. Assume that Bertram sold the bonds on 1 February 20X9, for 99 plus accrued interest. Give the entry to record interest revenue to 1 February, and the entry for the sale. ...813 ...30, 1 87 ..10,333 279 10,054 Solution 1 February Interest receivable (1/6 of $3 1,000)... Investment in debt securities: Fox Corp. bonds (1/6 of $837) Investment revenue: Interest (1/6 of $30, 163) .. Cash ($1,000,000 x .99)+ $10,333 + $5,167... Investment revenue: Loss on sale of bond... Interest receivable. .. .. .. 5,167 140 5,027 1,005,500 ..15.002 ..15,500 1,005,002 Investment in debt securities: Fox Corp. bonds *$1,005,421- $279 - $140
