Problem #3: Investments in Corporate Bonds (54 points) D. E. Laser Technologies Corp. regularly invests excess cash in corporate bonds and stocks depending on market conditions. The Company holds the investments with the intent of selling them within one to three months to realize any gains in the value of the securities and limit the losses sustained when the value of a security begins to decline. 1. On December 2, 2018, D. E. Laser Technologies Corp. made the following investments: Purchased $500,000 of Austin Power Company bonds with coupon interest payments of 8.25% due semiannually and paid a price for the securities that resulted in a yield to investors of 8.3% if held to maturity Purchased $650,000 of bonds issued by Chapman Industries with 8.8% stated coupon payments due on December 31 and June 30 at a price of approximately 100 %. At December 31, 2018, D. E. Laser Technologies Corp. obtained the following information relative to the fair market values of the bonds: Austin Power Company bonds was selling at 102 The market price of the Chapman Industries bonds reflected a 0.5% decrease in the bond's yield rate due to changes in general market conditions since December 2, 2018. Required: Answer the following questions based on the facts provided above. Indicate your answers by writing an "X" in applicable spaces provided. You must provide support for your answers. (2 points per question 20 points) a) Did D. E. Laser Technologies Corp. acquire the Austin Power Company bonds at a price that was more than 100 or less than 100? More Less SUPPORT: b) Did the price of the Austin Power Company bonds on December 31, 2018 indicate that their yield rate increased or decreased from December 2, 2018? Increased Decreased SUPPORT: More c) Was the yield rate on the Austin Power Company bonds at December 31, 2018 more than 8.25% or less than 8.25%? Less SUPPORT: d) Did D. E. Laser Technologies Corp. report an Unrealized Holding Gain or an Unrealized Holding Loss on the Austin Power Company bonds for the period ending December 31, 2018? Gain Loss SUPPORT: e) Did D. E. Laser Technologies Corp. report the Unrealized Holding Gain (Loss) on the Austin Power Company bonds in Net Earnings (NE) or in Other Comprehensive Income (OCI) for the period ending December 31, 2018? NE OCI SUPPORT: f) Did D. E. Laser Technologies Corp. acquire the Chapman Industries bonds at a price that resulted in a yield to maturity rate that was more than 8.8% or less than 8.8%? More Less SUPPORT: g) What was the amount of cash paid by D. E. Laser Technologies Corp. on Your Answer December 2, 2018 to acquire the $650,000 face value of Chapman Industries bonds? SUPPORT: h) Was the price of the Chapman Industries bonds at December 31, 2018 more than 100 V2 or less than 100 2? More Less SUPPORT: i) Did D. E. Laser Technologies Corp. report the investment in the Chapman Industries bonds in its statement of financial position at December 31, 2018 at an amount equal to their Amortized Cost (AC) or at their Fair Market Value (FMV)? AC FMV SUPPORT: j) Did D. E. Laser Technologies Corp. report an Unrealized Holding Gain or an Unrealized Holding Loss on the Chapman Industries bonds for the period ending December 31, 2018? Gain Loss SUPPORT: On December 31, 2018, Wanda Fish Co. purchased $825,000 face value of 15-year bonds issued on that date by Gold Health and Beauty Products Inc. at a price to yield investors 7.4%. The bonds paid interest at a stated coupon interest rate of 7.5% in semiannual instaliments on June 30 and December 31. Use a financial calculator or Excel to compute the total amount of cash paid by Wanda Fish Co. to purchase the $825,000 of the Gold Health and Beauty Products Inc. bonds. Then calculate the quoted bond price at which the secunties were purchased by Wanda Fish Co Provide the values that you input into your calculator or the Excel formula with the values that you used to compute the amount of cash paid by Wanda Fish Co. to purchase the bonds EINANCIAL CALCULATOR INPUTS MODE FV PMT 1/Y PV N CPT [PV EXCEL INPUTS Your Answer Total Cash Paid by Wanda Fish Co. (4 points) Your Answer Quoted Price of the Gold Health and Beauty Products Inc. bonds at issuance (2 points) Prepare the general journal entry required to record the purchase of bonds by Wanda Fish Co. The Company dassified the bonds as avallable-for-sale securities. (4 points) b. CREDIT DEBIT ACCOUNT NAMES DATE Use the amortization schedule form provided on to compute the amount of interest revenue earned on the bonds by Wanda Fish Co. during 2019 and the resulting amortized cost of the bond investment at December 31, 2019 under the effective interest method. (8 points) C. Comprehenslve Income Statement Statement of Cash Flows Amortization Balance Sheet Amortization of Discount Carrying Value Amortized Cost Interest Revenue Cash Recelved Period (Premium) 2 Prepare the general journal entries required to record the bond interest payments recelved by Wanda Fish Co. on June 30, 2019 and on December 31, 2019. (6 polnts) d. CREDIT DEBIT ACCOUNT NAMES DATE At December 31, 2019, the Gold Health and Beauty Products Inc.. bonds were selling at 99 % e. Prepare the adjusting general jounal entry required to record the unrealized holding gain (loss) recognized by Wanda Fish Co. at December 31, 2019 relative to the Gold Health and Beauty Products Inc. bonds. The bonds were the first investment in debt securities ever made by Wanda Fish Co. (4 points) DATE ACCOUNT NAMES DEBIT CREDIT Supporting Calculations Required: f. Complete the following table to indicate the items and amounts reported by Wanda Fish Co. in its 2019 GAAP financial statements relative to the bonds classified as available-for-sale assuming the Company does not intend to sell the bonds during 2018. (6 points) Statement of Financial Position at December 31, 2019: Amount Current Assets Noncurrent Assets: Comprehensive Income Sstatement for the Fiscal Year 2019: Amount Nonoperating Items: (in Net Earnings) Other Comprehensive Income Complete the following table to indicate the items and amounts reported by Wanda Fish Co. in its 2019 GAAP financial statements relative to the bonds if the Company had the positive intent and the financial and practicable ability to hold the bonds until the end of their 15-year year. (4 points) g. Statement of Financial Position at December 31, 2019: Amount Current Assets: Noncurrent Assets: Amount Comprehensive Income Statement for the Fiscal Year 2019: Nonoperating Items: (in Net Earnings) other Comprehensive Income