Investments (F3)

Question 1

Bond Investment

Answer 1

500,000 FV 8%
Purchased for 456,200 10% yield

Interest Receivable 40,000 (500,000 * .08)
Investment 5,620
Interest Revenue 45,620 (456,200 * .10)

Question 2

Carrying Value Equity Method

Answer 2

100,000 acquisition price
30% stock * (40,000 earnings - 25,000 dividends)
=104,500