Savvy Investor Inc. purchased several $1,000 bonds on January 1, 2020. Interest is paid semi...
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Accounting
Savvy Investor Inc. purchased several $1,000 bonds on January 1, 2020. Interest is paid semi annually on July 1 and January 1. The bonds mature on January 1, 2025. Savvy uses the amortized cost method to account for the bonds. Savvy has a year end of December 31 and follows IFRS.Other information pertaining to the investment follows:
Face Value $72,000
Coupon rate 10%
Market Rate on Jan 1, 2020 9%
Required:
- Determine the amount of cash paid for the bond and prepare the journal entry to record the purchase.
- Prepare the journal entries for the receipt of interest and amortization of the premium on July 1, 2020, and the year-end accrual. Round all values to the nearest dollar.
- To the nearest dollar, what is the carrying value of the investment at the end of 2022?
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