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    Investment in Bonds - At Amortized Cost

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    Investment in Bonds - At Amortized Cost

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    5 views5 pages

    Investment in Bonds - At Amortized Cost

    Uploaded by

    gionna0818

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Problem 20-9 - Amortized Cost

    January 1, 2023 - Acquisition of Bond Investment


    Face Value 4,000,000.00
    Discount -6.10% (244,000.00)
    Acquisition Cost 93.90% 3,756,000.00

    Investment in Bonds 3,756,000.00


    Cash 3,756,000.00

    December 31, 2023 - Adjustments


    Cash 360,000.00
    Investment in Bonds 15,600.00
    Interest Income 375,600.00

    Amortization Tabl 9% 10%


    Date Interest Received
    Interest IncomeAmortizationCarrying Amount
    Jan 1, 2023 3,756,000.00
    Dec 31, 2023 360,000.00 375,600.00 15,600.00 3,771,600.00
    Dec 31, 2024 360,000.00 377,160.00 17,160.00 3,788,760.00
    Dec 31, 2025 360,000.00 378,876.00 18,876.00 3,807,636.00
    Dec 31, 2026 360,000.00 380,763.60 20,763.60 3,828,399.60
    Dec 31, 2027 360,000.00 382,839.96 22,839.96 3,851,239.56
    Dec 31, 2028 360,000.00 385,123.96 25,123.96 3,876,363.52
    Dec 31, 2029 360,000.00 387,636.35 27,636.35 3,903,999.87
    Dec 31, 2030 360,000.00 390,399.99 30,399.99 3,934,399.85
    Dec 31, 2031 360,000.00 393,439.99 33,439.99 3,967,839.84
    Dec 31, 2032 360,000.00 392,160.16 32,160.16 4,000,000.00
    Total 3,600,000.00 3,844,000.00 244,000.00

    December 31, 2032 - Settlement of Bonds


    Cash 360,000.00
    Investment in Bonds 32,160.16
    Interest Income 392,160.16

    Cash 4,000,000.00
    Investment in Bonds 4,000,000.00

    Problem 20-13
    January 1, 2023 - Acquisition of Bond Investment
    Face Value 5,000,000.00
    Discount -8.76% (438,000.00)
    Acquisition Cost 91.24% 4,562,000.00

    Investment in Bonds 4,562,000.00


    Cash 4,562,000.00

    December 31, 2023 - Adjustments


    Cash 400,000.00
    Investment in Bonds 56,200.00
    Interest Income 456,200.00

    Amortization Tabl 8% 10%


    Date Interest Received
    Interest IncomeAmortizationCarrying Amount
    Jan 1, 2023 4,562,000.00
    Dec 31, 2023 400,000.00 456,200.00 56,200.00 4,618,200.00
    Dec 31, 2024 400,000.00 461,820.00 61,820.00 4,680,020.00 Letter A.
    Dec 31, 2025 400,000.00 468,002.00 68,002.00 4,748,022.00
    Dec 31, 2026 400,000.00 474,802.20 74,802.20 4,822,824.20
    Dec 31, 2027 400,000.00 482,282.42 82,282.42 4,905,106.62
    Dec 31, 2028 400,000.00 494,893.38 94,893.38 5,000,000.00
    Total 438,000.00

    January 1, 2029 - Settlement of bonds


    Cash 5,000,000.00
    Investment in Bonds 5,000,000.00

    Problem 20-12 - Amortized Cost - In Between Interest Date Transactions


    July 1, 2023 - Acquisition of Bond Investment
    Face Value 100.00% 1,000,000.00
    Discount -9.40% (94,000.00)
    Acquisition Cost 90.60% 906,000.00
    Accrued Interest (1,000,000 x 8% x 6/12) 40,000.00
    Cash to be released 946,000.00

    Investment in Bonds 906,000.00


    Interest Receivable 40,000.00
    Cash 946,000.00

    December 31, 2023 - Accrual of Interest


    Interest Receivable 40,000.00
    Investment in Bonds 5,300.00
    Interest Income 45,300.00
    Interest Receivabl 80,000.00

    January 1, 2024 - Collection of Interest


    Cash 80,000.00
    Interest Receivable 80,000.00

    Amortization Tabl 8% 10%


    Date Interest Received
    Interest IncomeAmortizationCarrying Amount
    July 1, 2023 906,000.00
    Dec 31, 2023 40,000.00 45,300.00 5,300.00 911,300.00 (July 1 to December
    Dec 31, 2024 80,000.00 91,130.00 11,130.00 922,430.00
    Dec 31, 2025 80,000.00 92,243.00 12,243.00 934,673.00
    Dec 31, 2026 80,000.00 93,467.30 13,467.30 948,140.30
    Dec 31, 2027 80,000.00 131,859.70 51,859.70 1,000,000.00 Balancing Figure
    94,000.00

    December 31, 2024-2027 - Accrual of Interest


    Interest Receivable 80,000.00
    Investment in Bonds 11,130.00
    Interest Income 91,130.00

    Interest Receivable 80,000.00

    January 1, 2025-2027 - Collection of Interest


    Cash 80,000.00
    Interest Receivable 80,000.00

    January 1, 2028 - Collection of Interest and Principal


    Cash 1,080,000.00
    Investment in Bonds 1,000,000.00
    Interest Receivable 80,000.00

    Observations:
    1. Premium Amortization
    - Effective Interest Rate is lower than the Nominal Interest Rate
    - Initial Measurement is higher than the Face Value of the bonds.
    - Interest Income is lower than the Interest Received.
    2. Discount Amortization
    - Effective Interest Rate is higher than the Nominal Interest Rate
    - Initial Measurement is lower than the Face Value of the bonds.
    - Interest Income is higher than the Interest Received.
    y 1 to December Letter A.

    ancing Figure

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