Questiоn 3 (Nоte: Questiоns 1-5 shаre а common fаct pattern) On 1/1/20, Evans Co. purchases a 8-year, $7,000,000 10% bond requiring semiannual interest payments from Godwin, Inc. Interest payments are to occur on 6/30 and 12/31 of each year. They classify this investment as “Trading”. Evans Co. pays an amount for the bond that creates an effective interest yield of 8%. The market value of Godwin’s bonds is $7,550,000 on 12/31/20. Please prepare the journal entries for the second interest payment (on 12/31/20) and any other necessary year-end entries.
Questiоn 9 (Nоte: Questiоns 9 & 10 shаre а common fаct pattern): On March 3, 2014, Rocky Inc purchases 400,000 shares of Knightro Inc for $15 per share. This investment gives Rocky ownership of 7% of Knightro’s outstanding shares. In June of 2014, Knightro pays a $.50 per share dividend to common shareholders. At year-end (December 2014), Knightro stock is trading at $12 per share. Knightro reports net income for the 2014 fiscal year as $600,000. Please record the necessary 2014 journal entries on Rocky’s books pertaining to their investment in Knightro (including the initial purchase on March 3rd of 2014).