Reference no: EM132941357

Question - Read the following case and use your knowledge, skills, and critical thinking to answer the questions below: You are taking your Acc 399 training course at USA Company which has great amount of excess cash. The CFO of USA Company asked you to provide your knowledge for investing the excess cash. You suggested that the best way to invest in purchasing the bonds of other companies known as debt investments, because you believe that debt investments are safe, secure, and profitable investments.

According to your suggestion, USA Company conducting the following transaction:

On January 1, 2018, purchased 10,000 bonds of New York Company, par value $900,000, 9% bonds at a price of $835,152. The interest is payable each January 1, and the bonds mature January 1, 2023. The investment will provide USA Company a 12% yield.

Required 1: The CFO of USA Company suggested to apply amortized cost to account for New York debt investments, what criteria should be met to apply amortized cost method?

Required 2: Based on the information provided in the case above, can the USA Company choose the fair value option to account for this debt investment? If yes, can the company change to apply the amortized cost method next year?

Required 3: What is the journal entry to record the purchase of New York Company debt investment?

Required 4: Prepare a bond amortization schedule for the first 2 years? Approximate to the nearest dollar.

Required 5: What is the impact on the statement of financial position on December 31, 2019?

Required 6: Assume that USA Company sold its investment in New York Company on July 1, 2019, at 97 plus accrued interest, prepare the journal entries to record this transaction?