ZuoTi.Pro
Question

Grouper Corp. purchased a $100,000 face-value bond of Myers Corp. on August 31, 2019, for $108,980...

Grouper Corp. purchased a $100,000 face-value bond of Myers Corp. on August 31, 2019, for $108,980 plus accrued interest. The bond pays interest annually each November 1 at a rate of 9%. On November 1, 2019, Grouper Corp. received the annual interest. On December 31, 2019, Grouper’s year end, the fair value for these bonds was 108.1. Grouper sold the bond on January 15, 2020, for $107,800 plus accrued interest. Assume Grouper Corp. follows IFRS.

Prepare the journal entries to record the purchase of the bond, the receipt of interest, any adjustments required at year end, and the subsequent sale of the bond.

How many months was the bond held for by Grouper Corp. in 2019? Based on this, how much of the income reported on this bond should be for interest received?

How much return did Grouper Corp. earn while the bond was held?

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Prepare the journal entries to record the purchase of the bond, the receipt of interest, any adjustments required at year end, and the subsequent sale of the bond.

date account debit credit
August 31, 2019 investment in bonds 100000
accrued interest receivable 8980
cash 108980
November 1st, 2019 cash 2250
interest revenue 2250
Dec 31, 2019 unrealized earning 8100
investment in bonds 8100
january 15 cash 107800
bonds payable 100000
interest payable 7800

How many months was the bond held for by Grouper Corp. in 2019?

It was held from august 31 to January 15th, (4 months, 15 days).

Based on this, how much of the income reported on this bond should be for interest received?

$3,375 this is the amount of interest received during the period of time the bond was held.

  • Annual interest rate 9%.
  • 100,000*9%=9000 annual interest.
  • 9000/12=750 monthly interest
  • 750*4.5months=$3,375.

How much return did Grouper Corp. earn while the bond was held?

Based on the nominal yield, we can say that the return rate was 0.09%, obtained by dividing the annual interest by the face value. Simply put, the return is equal to the interest received.

0 0
Add a comment
Know the answer?
Add Answer to:
Grouper Corp. purchased a $100,000 face-value bond of Myers Corp. on August 31, 2019, for $108,980...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A company holds a $100,000 face value corporate bond, bought January 1, 2019, paying 3% annually...

    A company holds a $100,000 face value corporate bond, bought January 1, 2019, paying 3% annually on December 31, and maturing December 31, 2021. The company paid $102,884 for the bond, to yield 2%. The company categorizes the bond as a held-to-maturity investment, and its accounting year ends December 31. Round answers to the nearest dollar. What is the approximate net entry to record receipt of interest and principal on December 31, 2021, assuming no impairment on the bond throughout...

  • Grouper Company, a public company following IFRS purchased $130,000, 4% five-year bonds of IAA Corporation on...

    Grouper Company, a public company following IFRS purchased $130,000, 4% five-year bonds of IAA Corporation on January 1, 2021. Interest is payable on July 1 and January 1. The bond is selling at a $135,995 resulting in a bond premium of $5,995. The effective interest rate is 3%. At the year-end of December 31, the fair value of the investment was $131,800. Prepare the appropriate journal entries for the year ending December 31, 2021 assuming that Grouper Company uses FV-OCI....

  • Cullumber Corp. issued a $2–million, four–year, 7.65% fixed-rate interest only, non-prepayable bond on December 31, 2019....

    Cullumber Corp. issued a $2–million, four–year, 7.65% fixed-rate interest only, non-prepayable bond on December 31, 2019. Cullumber later decided to hedge the interest rate and change from a fixed rate to variable rate, so it entered into a swap agreement with M&S Corp. The swap agreement specified that Cullumber will receive a fixed rate of 7.65% and pay variable rate interest with settlement dates that match the interest payments on the instrument. Assume that interest rates declined during 2020 and...

  • Cullumber Corp. issued a $2–million, four–year, 7.65% fixed-rate interest only, non-prepayable bond on December 31, 2019....

    Cullumber Corp. issued a $2–million, four–year, 7.65% fixed-rate interest only, non-prepayable bond on December 31, 2019. Cullumber later decided to hedge the interest rate and change from a fixed rate to variable rate, so it entered into a swap agreement with M&S Corp. The swap agreement specified that Cullumber will receive a fixed rate of 7.65% and pay variable rate interest with settlement dates that match the interest payments on the instrument. Assume that interest rates declined during 2020 and...

  • On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-year bonds with a face value...

    On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-year bonds with a face value of $12,000 at par plus four months of accrued interest. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Required: Prepare the June 30 journal entries to record the receipt of the interest. (2)

  • On April 1, 2019, Red Company purchased as a trading security a P1,000,000 face value 8%...

    On April 1, 2019, Red Company purchased as a trading security a P1,000,000 face value 8% bond for P920,000 plus brokerage of P12,000 and accrued interest. The bonds mature on January 1, 2023 and pay interest annually on January 1. On December 31, 2019, the bonds had a market value of P965,000. For the year ending December 31, 2019 income statement, what amount should Red report as Unrealized gain or loss from trading securities?

  • Feb. 1 Purchased 12% Atom Company bonds with a face value of $20,000 at par, plus...

    Feb. 1 Purchased 12% Atom Company bonds with a face value of $20,000 at par, plus accrued interest. Interest on the bonds is payable February 28 and August 31 each year, and the bonds are due August 31, 2019. Also purchased 10% Bradford Company bonds with a face value of $12,000 at par, plus accrued interest. Interest on the bonds is payable March 31 and September 30, and the bonds are due September 30, 2022. These are the only bonds...

  • Cullumber Corp. issued a $2–million, four–year, 7.65% fixed-rate interest only, non-prepayable bond on December 31, 2019....

    Cullumber Corp. issued a $2–million, four–year, 7.65% fixed-rate interest only, non-prepayable bond on December 31, 2019. Cullumber later decided to hedge the interest rate and change from a fixed rate to variable rate, so it entered into a swap agreement with M&S Corp. The swap agreement specified that Cullumber will receive a fixed rate of 7.65% and pay variable rate interest with settlement dates that match the interest payments on the instrument. Assume that interest rates declined during 2020 and...

  • Beaumont Corp. issues a 10-year semiannual convertible 6.3% bond with a face value of £2,980,000....

    Please answer ASAP. I'll give you thumbs up. *IFRS* Beaumont Corp. issues a 10-year semiannual convertible 6.3% bond with a face value of £2,980,000. The bond was issued at 103.8. Comparable bonds without a conversion feature would have required a return of 8.2%. Show all your work. 1. What was the market rate interest of the bonds (when they were sold)? PMT = FV Annual Interest rate 2. Determine how much of the proceeds would be allocated to debt and...

  • On August 1, 2017, Cheyenne Corp. issued $484,800, 6%, 10-year bonds at face value. Interest is...

    On August 1, 2017, Cheyenne Corp. issued $484,800, 6%, 10-year bonds at face value. Interest is payable annually on August 1. Cheyenne’s year-end is December 31. Prepare a tabular summary to record the following events. (a) The issuance of the bonds. (b) The accrual of interest on December 31, 2017. (c) The payment of interest on August 1, 2018. I got the the A and B it is ( c) that is giving me issues please help me understand what...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT