M131BCH17PRACTICEPROBLEMSwithsolutions

Intermediate Accounting

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M131B: INTERMEDIATE ACCOUNTING CHAPTER 17 PRACTICE PROBLEMS NAME:_______________________________________ ID#__________________________________________ 1. On November 1, 2007, Morton Co. purchased Gomez, Inc., 10-year, 9%, bonds with a face value of $250,000, for $225,000. An additional $7,500 was paid for the accrued interest. Interest is payable semiannually on January 1 and July 1. The bonds mature on July 1, 2014. Morton uses the straight-line method of amortization. Ignoring income taxes, the amount reported in Morton's 2007 income statement as a result of Morton's available-for-sale investment in Gomez was a. $4,375. b. $4,167. c. $3,750. d. $3,333. ($250,000 × .045) + ($25,000 × 2/80) – $7,500 = $4,375. 2. During 2005, Plano Co. purchased 2,000, $1,000, 9% bonds. The carrying value of the bonds at December 31, 2007 was $1,960,000. The bonds mature on March 1, 2012, and pay interest on March 1 and September 1. Plano sells 1,000 bonds on September 1, 2008, for $988,000, after the interest has been received. Plano uses straight-line amortization.
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M131BCH17PRACTICEPROBLEMSwithsolutions - M131B:...

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