Prepare the entry to record the sale of the bonds

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Question - Assume that at begging of year 2020, ABC purchase a $ 1 million DEF corporation 10% bonds semi-annually for 6 years. The risk-free rate or market rate of interest rate at that time is 12% (compound semi-annually).

a) Prepare the amortization table effective interest rate is applied here.

b) Show the difference between straight line method and effective interest method of Bond investment for 2020/07/01 and 2020/09/01.

c) If ABC sells the bonds on 2022/10/01 at 99.6% plus accrued interest. Prepare the entry to record the sale of the bonds. (Or you can calculate the cash that ABC received directly)

d) Assume that at end of year 2021, the fair value of the DEF bonds is $1,000,000. Calculate the FV-NI investment adjustment value. What if the yield rate change to 8%, Prepare the Amortization table and calculate the FV-NI investment adjustment?

Reference no: EM133032216

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