Reference no: EM132902408
Questions -
Q1. On October 1, 2020, Mesi Inc. bought 4,000 of the $1,000 face amount, 10% bonds of Gems Corporation for $4,400,000 that includes accrued interest of $100,000. The bonds that will mature on January 1, 2027, pay interest semiannually on January 1 and July 1. The entity used the straight line method of amortization and appropriately recorded the bonds as financial asset at amortized cost.
a. What amount is the total income to be recognized in the Income Statement for 2021?
b. On December 31, 2024, what amount is the balance of investment to be presented in the Statement of Financial Position?
Q2. Sofia Corporation acquired $6,000,000 of Sooya Inc.'s 12% bonds on May 1, 2020 at 94 plus accrued interest to be held as financial asset at amortized cost. The bonds pay interest semiannually on February 1 and August 1, and mature on February 1, 2024. The fiscal period for Sofia Corporation is the calendar period. Amortization is done following the straight line method. On May 1, 2022, Sofia Corporation sold all the bonds at 105 plus accrued interest.
a. What amount is the total income to be recognized in the Income Statement for 2021?
b. On December 31, 2021, what amount is the balance of investment to be presented in the Statement of Financial Position?
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