Ask Question
21 May, 09:58

On July 1, Year 4, Pell Co. purchased Green Corp. 10-year, 8% bonds with a face amount of $500,000 for $420,000. The bonds are classified as held-to-maturity, mature on June 30, Year 14, and pay interest semiannually on June 30 and December 31. Using the interest method, Pell recorded bond discount amortization of $1,800 for the 6 months ended December 31, Year 4. From this long-term investment, Pell should report Year 4 revenue of:

+3
Answers (1)
  1. 21 May, 10:26
    0
    Options Include:

    A. $20,000

    B. $16,800

    C. $18,200

    D. $21,800 is Correct

    Explanation:

    Interest income for a bond provided at a discount is equal to the total of both the periodic cash flows as well as the value of the amortized bond discount during the interest duration.

    Periodic cash flows are equivalent to $20,000 ($500,000 death benefit multiply by 8 percent coupon rate multiply 1/2 year). The amortization for the discount is provided as $1,800.

    Income for the six-month period from July 1 to December 31, Year 4, is therefore $21,800 ($20,000 + $1,800).
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “On July 1, Year 4, Pell Co. purchased Green Corp. 10-year, 8% bonds with a face amount of $500,000 for $420,000. The bonds are classified ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers