General Investment Co GIC Purchased the Bonds:
A)At Par

question 10

Short Answer

General Investment Co.(GIC)purchased bonds on January 1,2012.GIC's accountant has projected the following amortization schedule from purchase until maturity:
$$\begin{array} { r r r c c } { \begin{array} { c } \text { Date } \\\end{array} } & \begin{array} { c } \text { Cash } \\\text { Paid }\end{array} & \begin{array} { c } \text { Interest } \\\text { Expense }\end{array} & \begin{array} { c } \text { Increase in } \\\text { Carrying Value }\end{array} & \begin{array} { c } \text { Carrying } \\\text { Value }\end{array} \\1 / 1 / 12 & && & \$ 194,758 \\6 / 30 / 12 & \$ 7,000 & \$ 7,790 & \$ 790 & 195,548 \\12 / 31 / 12 & 7,000 & 7,822 & 822 & 196,370 \\6 / 30 / 13 & 7,000 & 7,855 & 855 & 197,225 \\12 / 31 / 13 & 7,000 & 7,889 & 889 & 198,114 \\6 / 30 / 14 & 7,000 & 7,925 & 925 & 199,039 \\12 / 31 / 14 & 7,000 & 7,961 & 961 & \$ 200,000\end{array}$$
GIC purchased the bonds:
A)At par.
B)At a discount.
C)At a premium.
D)Cannot be determined from the given information.

Understand and identify the differences between investment centers and profit centers.

Calculate investment turnover and understand its implications.

Calculate profit margin and understand its relevance in assessing divisional performance.

Understand the impact of negotiated transfer prices on operating income of divisions and the company as a whole.

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