Question

The Argyle Company acquired a $10 million face value bond that has an 8% coupon rate...

The Argyle Company acquired a $10 million face value bond that has an 8% coupon rate (pays interest annually on December 31) on January 1, 2017. The bond matures on December 31, 2019. On January 1, 2017, the market yield (market rate) for bonds of equivalent risk and maturity was 6%.

Required:

  1. How much did Argyle pay for this bond on January 1, 2017?
  2. Prepare the journal entries required on:
    1. December 31, 2017
    2. December 31, 2018
    3. December 31, 2019
  3. Assume that on January 1, 2018 the market rate for this bond was 7%. Prepare the journal entries required if the bonds were classified as:
    1. amortized cost
    2. FVPL
    3. FVOCI
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