On December 31, 2015, Martin Corp invested in Marlin's 5-year, $200,000 bond with a 5% interest rate for $191,575. The bond pays semiannual interest on June 30th and December 31st. The fair values of the bonds at the end of 2016-2018 are $194,500, $194,200, and $195,750. Martin sold its investment in Marlin's bond on July 1, 2019 at 98%½ (i.e. selling price is = 98.5% of the face value). Please answer all following questions using Excel Template.
A. What is the market interest rate for Marlin's bond?
B. Prepare an amortization schedule related to the bond investment in Marlin. How does Martin's investment classification (as HTM, AFS, or Trading) influence this amortization schedule?
C. Assuming the bonds are classified as held-to-maturity investments,
• Prepare the journal entries on December 31, 2015
Prepare the journal entries related to the bond on December 31, 2016.
Prepare the journal entries related to the bond on December 31, 2018.
• Prepare the journal entries related to the bond on July 1 2019.
D. Assuming the bonds are classified as AFS investment, prepare the journal entries on aforementioned dates.
E. Assuming the bonds are classified as Trading investment, prepare the journal entries on aforementioned dates.
