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Problem 1 (35 points) Facts: On January 1, 2020, GK Ranch Co. sells 500,000 of its $1,000 face value, 15 year, 10% bonds. The bonds pay interest on January 1 and July 1. Baskin Inc. purchases 36,000 of these bonds on January 1, 2020 and considers these bonds available for sale. A schedule of market interest rates on certain dates throughout the 15-year life of the bonds is as follows: Market Interest Rate Date January 1, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 11% 12% 10% 9% 8% 8% 4. Show how Baskin's investment in the GK Ranch bonds would be reported on Baskin's 2021 Balance Sheet. (3 points) 5. Baskin Inc. sells the bonds to Myrtle Incorporated on July 1, 2022 when the market interest rate is 8%. Baskin Inc. received the interest payment to which it was entitled from GK Ranch the day of the sale. Baskin Inc. only records fair value adjustments on December 31 (and therefore not in interim period financial statements). Provide all journal entries that Baskin Inc. must record on July 1, 2022. (12 points) Problem 1 (35 points) Facts: On January 1, 2020, GK Ranch Co. sells 500,000 of its $1,000 face value, 15 year, 10% bonds. The bonds pay interest on January 1 and July 1. Baskin Inc. purchases 36,000 of these bonds on January 1, 2020 and considers these bonds available for sale. A schedule of market interest rates on certain dates throughout the 15-year life of the bonds is as follows: Market Interest Rate Date January 1, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 11% 12% 10% 9% 8% 8% 4. Show how Baskin's investment in the GK Ranch bonds would be reported on Baskin's 2021 Balance Sheet. (3 points) 5. Baskin Inc. sells the bonds to Myrtle Incorporated on July 1, 2022 when the market interest rate is 8%. Baskin Inc. received the interest payment to which it was entitled from GK Ranch the day of the sale. Baskin Inc. only records fair value adjustments on December 31 (and therefore not in interim period financial statements). Provide all journal entries that Baskin Inc. must record on July 1, 2022. (12 points)

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