Patton Company purchased $1,500,000 of 10% bonds of Scott Company on January 1, 2018, paying $1,410,375. The bonds mature January 1, 2028; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2018, Patton Company should report interest revenue from the Scott Company bonds of:

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Answer 1
Answer:

Answer:

Value of the bonds at December 31th: 1,415,658

Interest revenue: 77570.63 + 77712.01 = 152,282.64

Explanation:

effective rate method:

interest revenue: carrying value x market rate

1,410,375 x 5.5% = 77,570.63

and 1,412,946 x 5.5 =  77,712.01

cash proceeds: face value x bond rate

1,500,000 x 10%/2 = 75,000

amortization on bonds: the difference between each other.

77570.63- 75,000 = 2,570.63

77,712.01 - 75,000 = 2,712.01

Period Carrying procceds Interest Amortization Ending Value

June      1,410,375  75000   77570.63     2570.63 1,412,946

Dec       1,412,946  75000    77712.01     2712.01 1,415,658


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breyer company bought inventory fob shipping point from cellar company for $4,000 cash, including shipping charges. on december 31, the last day of the accounting year, the goods were on a truck owned by common carrier company, and not expected to arrive until january 3. which company should include these goods in its december 31 inventory?

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If Breyer company bought inventory fob shipping point from cellar company for $4,000 cash, including shipping charges. The company that should include these goods in its December 31 inventory is: Breyer should include the 4,000 in its inventory

Breyer company should include the amount of $4,000  which is the amount paid in cash for purchasing or buying from Cellar company in its December 31 inventory.

Reason been that Breyer company has already paid for the goods including the cost of shipping the goods.

Even though the goods were not delivered to Breyer  before  December 31  but till January 3, Breyer has the right to include the amount of $4,000 in its inventory because the goods is no longer in the seller  who is Cellar company possession again and because the goods has been paid for .

Inconclusion if Breyer company bought inventory fob shipping point from cellar company for $4,000 cash, including shipping charges. The company that should include these goods in its December 31 inventory is: Breyer should include the 4,000 in its inventory.

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Final answer:

The inventory should be included in the December 31 inventory of Breyer Company due to the terms of the transaction being FOB shipping point, which signifies that the ownership of goods transfers to the buyer once the goods are shipped.

Explanation:

The inventory should be included in the December 31 inventory of Breyer Company. This is due to the mention that the purchase was made FOB shipping point. FOB stands for Free On Board, which is a term in commercial law. FOB shipping point signifies that the ownership of goods is transferred to the buyer (Breyer Company in this case) once the seller (Cellar Company) ships the goods. Therefore, even though the goods were still on the truck owned by Common Carrier Company and not yet arrived, they should be included in the inventory of Breyer Company on December 31 because it became their responsibility once the goods were shipped.

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Answer:

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