Reference no: EM133021686
Question - On 1 June 20X8, Ghana Company purchased $8,500,000 of Monaco Corp. 3.80% bonds, classified as a FVOCI-Bond investment. The bonds pay semi-annual interest each 30 May and 30 November. The market interest rate was 4% on the date of purchase. The bonds mature on 30 May 20X13.
Required -
1. Calculate the price paid by Ghana Company.
2. Construct a table that shows interest revenue reported by Ghana, and the carrying value of the investment, for the each interest periods for four interest period. Use the effective-interest method.
3. Prepare the entries for 20X8 and for 20X9, including the year-end accrual, based on your calculations in requirement 2
4. At the year-end, 31 December 20X8 and 31 December 20X9, the fair value of the bonds was $8,600,000 and $8,005,000 respectively. Prepare the entries to record the changes in fair value.
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