On 1 May 2007, Bertrum Ltd. purchased $1,300,000 of Fox Corp. 6.3% bonds. The bonds pay semi-annual interest each 1 May and 1 November. The market interest rate was 6% on the date of purchase. The bonds mature on 1 November 2011. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)

Required:

1. Calculate the price paid by Bertrum. (Round time value factor to 5 decimal places. Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)

2. 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. (Round your answers to the nearest whole dollar amount.)

3. Assuming the bond is classified as AC, prepare the entries for 2007 and 2008 for Bertrum, including adjusting entries at the 31 December year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

4. Assuming that the bond is classified as AC and that Bertrum sold the bonds on 1 February 2009, for 99 plus accrued interest. Prepare the entry to record interest revenue to 1 February, and the entry for the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

5. Assume instead that the investment is classified as FVOCI-Bond. Repeat requirements 3 and 4 above and prepare the entries for 2007, assuming that the fair value of the bond was $1,350,000 on 31 December 2007 and $1,610,000 on December 31 2008. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.) Prev Question 1 of 4 Total 1 of 4 Visit question mapNext