1. At what amount should RED initially record its investment in Orange Company?2. At what amount should RED initially record its investment in Yellow Corporation?3. How much gain or (loss) should be recognized on the sale of Yellow bonds? PROBLEM 1:RED Company had the following transactions in bond investment held as trading for the current year:April 1- Purchased 2,000, P1,000, 12% bonds of Orange Company at 92 excluding accrued interest. Interest ispayable on February 1 and August 1April 30 – Purchased 3,000, #1,000, 10% bonds of Yellow Corporation at 96 plus accrued interest. Interest is payableMarch 1 and September 1October 1- Sold 1,200 of the Yellow bonds at 103 excluding interestNovember 30 - Sold 70% of the Orange bonds at 90 plus accrued interestDecember 31 - The market value of ORANGE bonds is 88; YELLOW Bonds is 105

Answer 1) Orange Company: 2,000 Bonds x P1,000 2,000,000 x 92%…

what amount should RED initially record its investment in Orange Company? 2. At what amount should RED initially record its investment in Yellow Corporation? 3. How much gain or (loss) should be recognized on the sale of Yellow bon

what amount should RED initially record its investment in Orange Company? 2. At what amount should RED initially record its investment in Yellow Corporation? 3. How much gain or (loss) should be recognized on the sale of Yellow bon

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 7MCQ

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