1.1 Determine the purchase price of the investment in bonds. 1.2 Prepare the journal entry to record the acquisition of the bond investment. 1.3 Prepare the journal entry to record the interest income at Jun 30, 2019
Capitol Corporation acquired $6,500,000 par value, 8%, five-year bonds on their date of issue, January 1,2019. The market rate at the time of issue was 12% and interest is paid semiannually on June 30 and December31. Capitol will use the effective interest rate method to account for this investment. Capitol intends to hold theinvestment until the bonds mature.
Table Present Value of $1
Periods 4% 6% 8% 12%
5 0.8219 0.7473 0.6806 0.5674
10 0.6756 0.5584 0.4632 0.3220
Table Present Value of an Ordinary Annuity
Periods 4% 6% 8% 12%
5 4.4518 4.2124 3.9927 3.6048
10 8.1109 7.3601 6.7101 5.6502
Instruction:
1.1 Determine the purchase price of the investment in bonds.
1.2 Prepare the
1.3 Prepare the journal entry to record the interest income at Jun 30, 2019
1.4 Prepare the journal entry to record the sale of the bonds at December 31,2021 for $6,100,000.
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