Question

rse E 16-2 (similar to) Question Help 2 (Click the icon to view the Present Value of $1 table) pter Nickle Quinnan Associates acquired $7.520.000 par value, 4%, 20-year bonds on leos their date of issue, January 1 of the current year. The market rate at the time of issue is 18% and interest is paid semiannually on June 30 and December 31 sign Quinnan uses the effective interest rate method to account for this investment Quinnan does not intend to hold the investment until maturity nor will it actively trade the bonds. The fair value of the bonds at the end of the year of acquisition is $5,197.900 (Click the icon to view the Future Value of $1 table.) (Click the icon to view the Future Value of an Ordinary Annuity table) (Click the icon to view the Future Value of an Annuity Due table) Click the icon to view the Present Value of an Ordinary Annuity table.) Click the icon to view the Present Value of an Annuity Due table) esul Read the requirements ears Requirement a. Determine the purchase price of the investment in bonds (Use the present value and future value tables, a financial calculator, or a spreadsheet for your calculations of using present and future value tables or the formula method, use factor amounts rounded to five decimal places XXXXXX Round your final answers to the nearest whole dollar) Multim The purchase price of the investment in bonds is S Study PI

Answer 1

Answer Page: No O @ Purchase price of the lovestorent Boi bonds Purchase price of the investment in bonds = Present value of per valere (maturity) + Resent value of faterest (annuity +(6320,00, trito) + ((48X25200) 1-(1+9%)") 15.12.2017 9% I [26x2 = 40 = (45.20,000 X 0.03184) + (150400 X 7011539 - 239436,8 + 1617906.944 = 1857343.744 1857344 Purchase price of the investment in bonds = $18573441 6 Journal enting the record the acquisition of bond investment Discount on bond investment = 7520,000 -1854344 = $ 5662656

bate Page. No ® Debit I Gedit $ 520,000 $1857344 $ 5662656 Particular Investment in bonds To cast To discount on bond investment Jani © Journal entries > To record interest revenue & discount amortization of bond On June 30, Interest vievenue = 1857344 X 9% = $167161 On dec 31, . interest Grevenue" = (1854344 +16761) 9% = 1874105X97 = $ 168669 Credit Date Particular . Cash Discount on bond investment To interest revenue Debit $ 150,400 $ 16761 June 30 $167,161 dec 31 $150400 $18269 Discount on bond investment To interest revenue $168669

Page No ③ © Towned enting fair value adjustment e-(1867344 + 16+61 +18269 + 5197900 = $5197900 –1892374 Date dec sr = $3305526 T . Particular Debit fein value adjvétment $3305526 To unrealized holding gain or lots -och- . Coedit $ 3305526