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On 1 January 2005, Franco Ltd. purchased $510,000 of Gentron Company 7.00% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 8% on the date of purchase. The bonds mature on 31 December 2010. (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 Franco Ltd. (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.) Price paid $ 510,000 2. Assume that the bond is classified as an AC investment. Construct a table that shows interest revenue reported by Franco, and the carrying value of the investment, for four interest periods. Use the effective-interest method. (Round your answers to the nearest whole dollar amount.) Period Cash Payment Interest Revenue Amortization 0 1 Bond Carrying Value $ 0 17,163 16,503 15,869 15,258 17,850 17,850 17,850 17,850 2 3 4 3. Prepare the entries for the first four interest periods based on your calculations in requirement 2. (If no entry is required fo transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole d amount.) View transaction list Journal entry worksheet 2 Record the second period revenue. 3 Record the third period revenue. 4 Record the fourth period revenue. Credit Note: = journal entry has been entered 4. Assume instead that the bond is classified as a FVTPL investment, and the fair value at the end of 2005 was $495,000, and was $501,500 at the end of 2006. Prepare the entries for each interest period in 2005 and 2006, and adjust the bond to fair value at the end of each fiscal year. (That is, the bond is not adjusted to fair value at each interest payment date, just at the reporting date.) (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.) View transaction list Journal entry worksheet Record the first period revenue. Note: Enter debits before credits. Date General Journal Debit Credit 30 Jun 2005 4. Assume instead that the bond is classified as a FVTPL investment, and the fair value at the end of 2005 was $495,000, and was $501,500 at the end of 2006. Prepare the entries for each interest period in 2005 and 2006, and adjust the bond to fair value at the end of each fiscal year. (That is, the bond is not adjusted to fair value at each interest payment date, just at the reporting date.) (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.) View transaction list X 1 Record the first period revenue. 2 Record the second period revenue. 3 Record the holding gain/loss on investment for the year ended 2005. 4 Record the third period revenue Credit 5 Record the fourth period revenue. 6 Record the holding gain/loss on investment for the year ended 2006. Note : = journal entry has been entered
