Please complete the following assignments IN EXCEL (show each assignment on a different tab):

Problem 1:

1)     Kitchen Co., purchased as a long-term investment million of 8% bonds, dated January 1, on January 1, 2021. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest is received semiannually on June 30 and December 31.

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Required:

a.

Prepare the journal entry to record Bay Path’s Best investment on January 1, 2017.

b.

Prepare the journal entry by Bay Path’s Best to record interest on June 30, 2017 (at the effective rate).

c.

Prepare the journal entry by Bay Path’s Best to record interest on December 31, 2017 (at the effective rate).

  1. At what amount will Bay Path’s Best report its investment in the December 31, 2017, balance sheet?

 Problem 2: 

Bay Path’s Best, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2017. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2017, was $70 million.

Required:1. to 3.

Prepare the relevant journal entries on the respective dates (record the interest at the effective rate).

At what amount will Bay Path’s Best report its investment in the December 31, 2017, balance sheet? 

Prepare the entry necessary to achieve this reporting objective. 

 Problem 3:

Bay Path’s Best, Inc., purchased as a short-term investment $80 million of 8% bonds, dated January 1, on January 1, 2017. Management intends to include the investment in a short-term, active trading portfolio. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2017, was $70 million.

Required:1. to 3.  

Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). 

At what amount will Bay Path’s Best report its investment in the December 31, 2017, balance sheet?

Prepare any entry necessary to achieve this reporting objective.

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