Question
On January 01, 2019, ABC Corp. Purchased XYZ Company bonds when the market interest rate was 8%. The XYZ bonds had a $500,000 maturity value,
On January 01, 2019, ABC Corp. Purchased XYZ Company bonds when the market interest rate was 8%. The XYZ bonds had a $500,000 maturity value, paid 6% interest semi-annually on June 30th and December 31st, and had a five year life. ABC Corp.'s year-end is at December 31.
ABC Corp uses IFRS for reporting purposes, therefore, will be using Effective-Interest Method.
Required: a) Calculate the price paid by ABC Corp. for the bonds. b) Prepare the journal entry to record the purchase of the bonds. c) Complete the table below that shows the interest revenue, carrying value of bonds, using the effective interest rate method.
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