Brynner Corp.\'s investments in held-to-maturity securities portfolio are as fol
ID: 2574287 • Letter: B
Question
Brynner Corp.'s investments in held-to-maturity securities portfolio are as follows: [12]
At the beginning of 2016, Brynner Corp. bought a $10000 bond issued by Tony Blair Corp.. The bond was priced to yield an effective rate of 6.2% per year. The coupon rate on the bond was 6.4% per year (paid annually). The bond was purchased for $10084. The bond comes due in exactly 5 years. Brynner Corp. expects to hold it until it reaches its maturity date. The coupon payments were received by Brynner Corp. before preparing financial statements for 820. At the end of Year One, the bond has a market value of $10210. Brynner Corp. chose not to use of the fair value option for this investment. What will be the recorded value of the Tony Blair Corp. bond on the Brynner Corp.'s Dec 31, 2016 financial statements?
10,069
10,572
11,076
11,579
12,083
10,069
10,572
11,076
11,579
12,083
Explanation / Answer
Recorded value of the bond
= Present value of the interest payments to be received for the remaining four years + Present value of the face value of the bond to be received at maturity
= [ ($10,000 x 6.4%) x PVIFA (6.2%, 4) ] + [ $10,000 x PVIF (6.2%, 4) ]
= ($640 x 3.4493) + ($10,000 x 0.7861)
= $10,069 (rounded up).
Thus, Tony Blair Corp. bond will be recorded on the Brynner Corp.'s Dec 31, 2016 financial statements at $10,069.
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