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  • Insurance Companies and Pension Plans Hold Large Quantities of Bond

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    trilocksp Singh
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    Prairie Insurance Corp. purchased $600,000 of 5% bonds from Eaton Inc. on March 1, 2017 at a price of 104.5% of par value. The bonds pay interest semi-annually on March 1 and September 1, and mature on March 1, 2022. At February 28, 2018, the market price of the bonds is 103.5. The document provides requirements to journalize the purchase of the bonds, receipt of interest, and accrual of interest at February 28, 2018 using the effective interest method and to show the financial statement effects of the bond investment at February 28, 2018.

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    Prairie Insurance Corp. purchased $600,000 of 5% bonds from Eaton Inc. on March 1, 2017 at a price of 104.5% of par value. The bonds pay interest semi-annually on March 1 and September 1, and mature on March 1, 2022. At February 28, 2018, the market price of the bonds is 103.5. The document provides requirements to journalize the purchase of the bonds, receipt of interest, and accrual of interest at February 28, 2018 using the effective interest method and to show the financial statement effects of the bond investment at February 28, 2018.

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    © All Rights Reserved
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    12 views1 page

    Insurance Companies and Pension Plans Hold Large Quantities of Bond

    Uploaded by

    trilocksp Singh
    Prairie Insurance Corp. purchased $600,000 of 5% bonds from Eaton Inc. on March 1, 2017 at a price of 104.5% of par value. The bonds pay interest semi-annually on March 1 and September 1, and mature on March 1, 2022. At February 28, 2018, the market price of the bonds is 103.5. The document provides requirements to journalize the purchase of the bonds, receipt of interest, and accrual of interest at February 28, 2018 using the effective interest method and to show the financial statement effects of the bond investment at February 28, 2018.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Insurance companies and pension plans hold large

    quantities of bond
    Insurance companies and pension plans hold large quantities of bond

    Insurance companies and pension plans hold large quantities of bond investments. Prairie
    Insurance Corp. purchased $600,000 of 5% bonds of Eaton Inc. for 104.5 on March 1, 2017,
    when the effective interest rate was 4%. These bonds pay interest on March 1 and September 1
    each year. They mature on March 1, 2022. At February 28, 2018, the market price of the bonds
    is 103.5.
    Requirements
    1. Journalize Prairie's purchase of the bonds as a long-term investment on March 1, 2017 (to be
    held to maturity), receipt of cash interest and amortization of the bond investment on September
    1, 2017, and accrual of interest revenue and amortization at February 28, 2018. Use the
    effective-interest method for amortizing the bond investment.
    2. Show all financial statement effects of this long-term bond investment on Prairie Insurance
    Corp.'s balance sheet and income statement at February 28, 2018?

    Insurance companies and pension plans hold large quantities of bond


    SOLUTION-- http://solutiondone.online/downloads/insurance-companies-and-pension-plans-
    hold-large-quantities-of-bond/

    Unlock answers here solutiondone.online

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