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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.) Answer is complete but not entirely correct. 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.) Answer is complete but not entirely correct. Period Cash Payment Interest Revenue Amortization AWNo $ 17,850 $ 17,850 17,850 17,850 19,443 $ 19,506 19,573 19,642 1,593 1,656 1,723 1,792 Bond Carrying Value 0 X 486,068 X 489,317 491,040 492,832 3. Prepare the entries for the first four interest periods based on your calculations in requirement 2. (lf 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.) Answer is complete but not entirely correct. No Date General Journal Debit Credit 1 30 Jun 2005 Cash 17,850 1,593 Investment revenue: Holding gain: Gentron bonds x Interest revenue 19,443 2 31 Dec 2005 Cash 17,850 1,656 Investment in debt securities: Gentron bonds Ooo Interest revenue 19,506 wl 30 Jun 2006 Cash 17,850 1,723 Investment in debt securities: Gentron bonds 0 Interest revenue 19,573 4 31 Dec 2006 Cash 17,850 Investment in debt securities: Gentron bonds 000 1.792 Interest revenue 19,642 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.) X Answer is not complete. No Date General Journal Debit Credit 1 30 Jun 2005 Cash 17,850 1,593 X Investment in debt securities: Gentron bonds X Interest revenue X 19,443 X 2 31 Dec 2005 Cash 17.850 Investment in debt securities: Gentron bonds x 1,656 X Interest revenue x 19,506 3 31 Dec 2005 Investment in debt securities: Gentron bonds 5,683 X Investment revenue: Holding gain: Gentron bonds 5,683 X 4 30 Jun 2006 Cash 17.850 Investment in debt securities: Gentron bonds 1,723 x Interest revenue x 19,573 X 5 31 Dec 2006 Cash 17,850 1,792 X Investment in debt securities: Gentron bonds x Interest revenue x 19.642 x 6 31 Dec 2006 Investment in debt securities: Gentron bonds 2,985 X Investment revenue: Holding gain: Gentron bonds 2,985 X 5. Show how the bond would be presented on the statement of financial position at the end of 2005 and 2006, if it were (a) AC and (b) FVTPL. (Round your answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. 2006 2005 (a) $ 510,000 $ 492,832 AC investment Investment in Gentron bond FVTPL investment Investment in Gentron bond (b) $ 510,000 X $ 545,700 >

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