Answer:
Journal Entry
01 July Debit Investment $240 million Credit Bank $200 million Credit Discount on investment $40 million
31 Dec Debit Bank $7,2 Million Debit Discount on Bond $0.8 million Credit Interest Income $8 million
Debit Fair Value loss on investment $30 million Credit Investment $30 million
Explanation:
Interest is received semiannually
6%/2 = 3%
interest = $240 million * 3% =7,200,000
8%/2 = 4%
Interest market $200 million * 4% =8,000,000
Fair value loss = 240 million - 210 million
= 30 million loss because cost is greater than fair value
Answer:
A) has no effect on the cash payments for interest reported in the operating activities section of the statement of cash flows
Explanation:
The amortization is an accounting method to match the difference in the nominal interest rate of bonds with the real interest rate the bond is yielding.
Th cash flow statment will just recognize the cash proceeds, which are calculate base on the face value, regardless of the premium or discount in the bond.
Answer:
Virtuous Circle
Explanation:
Virtuous circle occurs when one good events feeds on itself to improve business further. In the question, blue inc. invested in social responsibilities initiative (a good event) which on turn generated profits for the company (improved the business), probably by the event leading them to having more loyal customers.
It is a self propagating advantageous situation in which a successful solution or events leads to more desired results or success. It creates a positive feedback loop, creating goodwill with the customers.
Answer:
It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.
Explanation:
