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Please show work when answering On January 1,Y1,ABC purchased a $60,000 bond that pays interest semi-annually at a rate of 6%. The prevailing market rate
Please show work when answering
On January 1,Y1,ABC purchased a $60,000 bond that pays interest semi-annually at a rate of 6%. The prevailing market rate for similar bonds is 5%. There are 4 years remaining in the bond's term. On 12/31/Y1, the bond had a market value of $65,000. On 12/31/Y2, the bond had a market value of $64,000. This is ABC 's first security purchase. 1. How much cash interest will this bond pay each period? 2. What is the bond's carrying value at the following dates? a. 1/1/Y1: b. 12/31/Y1 : c. 12/31/Y2 : 3. Assume ABC classifies the bond as HTM: a. What would be the balance of the investment account presented on the balance sheet at 12/31/Y1 ? b. What amount of gain or loss (not including interest amounts) related to the bond would be presented on the Y1 income statement? c. What amount of gain or loss (not including interest amounts) related to the bond would be presented on the Y2 income statement? 4. Assume ABC classifies the bond as AFS: a. What would be the balance of the investment account presented on the balance sheet at 12/31/Y1 ? b. What amount of gain or loss (not including interest amounts) related to the bond would be presented on the Y1 income statement? c. What amount of gain or loss (not including interest amounts) related to the bond would be presented on the Y2 income statement? 5. Assume ABC classifies the bond as trading. a. What would be the balance of the investment account presented on the balance sheet at 12/31/Y1 ? b. What amount of gain or loss (not including interest amounts) related to the bond would be presented on the Y1 income statement? c. What amount of gain or loss (not including interest amounts) related to the bond would be presented on the Y2 income statementStep by Step Solution
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