Please help to answer above questions. Especially for #2 and #3, please giving d
ID: 2546888 • Letter: P
Question
Please help to answer above questions. Especially for #2 and #3, please giving details that how to determine FMV. Thank you!
On January 1, 2018, ABC Company purchases the bonds of XYZ Company. The bonds have a face value of $150,000 and a stated rate of interest of 6%. Interest is paid on 6/30 and 12/31 and the bonds mature on January 1, 2028. On 1/5/2019 the bonds were sold for $125,000 The market rate of interest is: 1/1/2018 7.0%, d 6/30/2018 8.0% 12/31/2018 9.096- Scenario 1: Assume HTM Scenario 2: Assume Available for Sale Scenario 3: Assume Trading Securitye Under each scenario, Please calculate the selling price of the bonds and prepare the appropriate purchase of the investment by ABC Please prepare ABC journal entries for interest for 6/30/2018 and for adjustment to FMV (hint: use the market rate on 6/30/2018 to determine FMV) Please prepare ABC journal entries for interest for 12/31/2018 and for adjustment to FMV (hint: use the market rate on 12/31/2018 to determine FMV) Please record the sale of the investment on 1/5/2019- 1. 2. 3. 4.Explanation / Answer
Fair market value is the price at which a willing seller sells a good or service to a willing buyer.
Let's assume John Doe wants to sell his house. He lists it for $750,000. Jane Dale wants to buy a house. She sees John's house for sale and offers him $675,000. The two negotiate the price and agree on $700,000. Because it is the price John and Jane agree to, the fair market value of the house is $700,000.
People often feel that houses, art, stocks, bonds and other items are "worth" a certain amount on the market, but the only true measure of worth -- the fair market value -- is the price at which someone is willing to sell and someone is willing to buy.
Companies with excess cash often invest those funds in other businesses' stocks or bonds. They decide whether they want to hold those securities for many years or for a few months. "Available-for-sale securities" refer to stocks or bonds the company purchased with the intention of selling whenever it needed cash. This approach can provide the company a higher return on its investment and the flexibility of cash. At the end of each period, companies calculate the fair market value of these securities and record this adjustment as an unrealized gain or loss. The unrealized gain or loss affects the company’s accumulated other comprehensive income, a component of stockholders' equity.
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