Question

On January 1, 2012, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000. The Cortland bonds have a stated interest rate of 6%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows January 1,2012 June 30, 2012 December 31 , 2012 7.0% 80% 90% Use PV of $1 and PVA of $1 Required: 1-a. Calculate the price lthaca would have paid for the Cortiand bonds on January 1, 2012 (ignoring brokerage fees). (Round "PV Factor" to 5 decimal places, other intermediate calculations and final answers to the nearest whole dollar amount.) Bond fair value S139341 1-b. Prepare a journal entry to record the purchase (Round "PV Factor" to 5 decimal places, other intermediate calculations and final answers to the noarest whole dollar amount.) Date Jan. 1Investment in bonds Generat Joumai 150000 Discount on bond investment Cash 10,659 139,341 2. Prepare all appropriate journal for the bonds as a held-to-maturity investment, thaca calculates interest revenue at the entries related to the bond investment during 2012, assuming Ithaca effective interest rate as of the date it purchased the bonds, (Round "PV Factor" to 5 places, other intermediat e calculations and final answers to the nearest whole dollar amount.) enov Fe

Answer 1