What appear on balance sheet of optimisticoutcomesenterprise

Assignment Help Financial Management

Reference no: EM133638104

Homework: Investments

On January 1, 2022, BeamingBooks Bureau sold $1,250,000 of 7% bonds to OptimisticOutcomes Inc. The bonds mature on December 31, 2025 (4 years). For bonds of similar risk and maturity, the market yield was 8%. Interest is paid semiannually on June 30 and December 31.

OptimisticOutcomes Enterprise purchased the bonds as an investmentand plans to hold the bonds for approximately 2years.

The fair value of the bonds at 12/31/22 was $1,305,000.

OptimisticOutcomes's fiscal year end is December 31 and 2022 was its first year of business.

Task

Question I. Prepare the fair value adjusting entry for OptimisticOutcomesEnterpriseas of 12/31/22. Show your work.

Question II. Show or describe exactly and specifically what will appear on the Balance Sheet of OptimisticOutcomesEnterprise as of 12/31/22, related to these bonds.

Question III. Show or describe exactly and specifically what will appear on the Income Statement of OptimisticOutcomesEnterprise for the year ending 12/31/22.

Question IV. Prepare thejournal entries OptimisticOutcomesEnterpriseshould make on the following dates related to this investment.Assume that the fair value of these bonds is $950,000 at 12/31/23.Show your work.

6/30/23:
12/31/23:

Question V. Assume Swift sells these bonds on 4/1/24 for $1,575,000. Prepare alljournal entries required on 4/1/24. Show your work.

Accrue interest as of 4/1/24:
Adjust to fair value as of 4/1/24:
Reclassification entry as of 4/1/24:
Record the sale of the investment on 4/1/24.

Reference no: EM133638104

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