On April 1, 2018, Fresco Ltd. Invests $10,000,000 in a bond issued by the Larimar...
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On April 1, 2018, Fresco Ltd. Invests $10,000,000 in a bond issued by the Larimar Co. The bond is a par issuance with an 11 % annual stated rate. The bond matures on December 31, 2019. Coupon payments are received on calendar quarter-end dates (March 31, June 30, September 30, December 3 1). Finally, Fresco provides financial reports on calendar quarters. The trading price of the Larimar Co. bond is as follows: Date Price June 30, 2018 $101 September 30, 2018 $101.5 December 31,2018 $100.5 March 31, 2019 $102 June 30, 2019 $101.5 $101 September 30, 2019 December 31, 2019 $100 a. Assume the Larimar bond investment is classified as held-to-maturity. Calculate the total amount of investment income that Fresco will record between purchase and maturity of the bond. b. Assume the Larimar bond is investment is classified as a trading security. i. Show the journal entries Fresco must record on December 31, 2018. Show the journal entries that Fresco must record if they sell the bond on April 1, 2019, for $102.25
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