On January 1, 2017, Panorama Company purchased $400,000, 8% bonds. The bonds were purchased to yield 10% interest.
Interest is payable semiannually on July 1 and January 1 with the first interest payment to occur on July 1, 2017.
The bonds mature on January 1, 2022. Panorama Company uses the effective-interest method to amortize discount or premium.
Panorama Company classifies the bonds as available-for-sale.
On January 1, 2019, Panorama Company sold the bonds for $370,726 after receiving interest to meet its liquidity needs.
Required:
(a) Determine the purchase price and prepare the journal entry to record the purchase of bonds on January 1, 2017.
(b) Prepare the amortization schedule for the bonds.
(c) Prepare the journal entries to record/accrue the semiannual interest each period.
(d) The fair value of the bonds is $372,726 on December 31, 2018, prepare the necessary adjusting entry.
Note that the fair value adjustment balance on December 31, 2017, is a debit of $3,375.
(e ) Prepare the journal entry to record the sale of the bonds on January 1, 2019.

Explanation:

Available for sale are those investment whose purpose is to earn interest income for strategic time. gain and loss are recorded in other comprehensive income and at the time of disposal any gain on income recorded will be routed through profit and loss. Accounting is done as per IFRS-9.

Face Value = $400000

Coupon Rate = 8%

IRR                = 10%

A) January 1, 2017

purchase Price = Face Value of bond i.e 400000

journal Entry

Investment in OCI   400000

                            Cash        400000

To record the invest in OCI.

B) Amortization Schedule

Date      opening value    IRR 10%    CR 8%     Closing Value  Fair value

1-1-2017   400000             40000      32000      408,000            411,375  

1-1-2018   411375               41,138         32000     420512             372726

C) journal Entries

30-6-2017

 Cash/Receivable      16000

         Interest Income     16000

To record the semi annual interest income

31-12-2017

Cash/Receivable      16000

         Interest Income OCI    16000

To record the semi annual interest income

Investment in bond OCI   8000

            Interest income OCI   8000

To record the invest in at Yield 10%                

1-7-2018

 Cash/Receivable      16000

         Interest Income     16000

To record the semi annual interest income

31-12-2018

Cash/Receivable      16000

         Interest Income OCI    16000

To record the semi annual interest income

Investment in bond OCI        9137

            Interest income OCI      9137

To record the invest in at Yield 10%                              

D)

31-12-2017

Investment in OCi         3375

            OCI                          3375

To record the Debit increase in Investment due to fair valuation.

31-12-2018

OCI        47,786

  Investment in bond OCI   47,786

To record the credit decrease in Investment due to fair valuation.

E)  Disposal of investment

Cash                        370726

Loss on Disposal     2000

             Invest in bonds OCI      372726

To record the disposal of investment aviable for sale

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi

answersecondary succession;