Question
On 1/1/2011, Al-Hurriya Company purchased financial bonds with a maturity (nominal) value of 800,000 dinars and an interest rate of 12%. Note that the bonds
On 1/1/2011, Al-Hurriya Company purchased financial bonds with a maturity (nominal) value of 800,000 dinars and an interest rate of 12%. Note that the bonds provide bondholders in the market with a yield of 10%. It is dated from 1/1/2011, and is due on 1/1/2016, with interest receivable 12/31/of each year. This is the business approach of Al-Hurriya Company to hold these bonds to collect contractual cash flows (the bond is held for collection). Required: (a) Prepare journal entries on the date of purchase of the bond. (B) Preparing the bond amortization schedule until 2012. (C) Preparing journal entries to record the interest received and amortization for the year 2011. (D) Prepare the necessary entries on December 31, 2011, assuming that the fair value of the bonds is 860,000 dinars. (e) Prepare the necessary entries on December 31, 2012, assuming that the fair value of the bonds is 840,000 dinars.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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