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Calculate the price paid by Sun Company

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Question - On 1 July 20X8, Sun Company purchased $4,000,000 of Moon Corp. 6.2% bonds, classified as an AC investment. The bonds pay semiannual interest each 30 June and 31 December. The market interest rate was 6% on the date of purchase. The bonds mature on 30 June 20X3.

Required -

1. Calculate the price paid by Sun Company

2. Construct a table that shows interest revenue reported by Sun, and the carrying value of the investment, for each interest period for four interest periods. Use the effective interest method.

3. Prepare the entries for the first two interest periods based on your calculations in requirement 2.

4. a. How much interest revenue would be reported for the year ended 31 December 20X9?

b. What would the balance of the investment account for the year ended 31 December 20x9?

Reference no: EM133021687

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