Blossom Company purchased 70 Rinehart Company 5%, 10-year, $1,000 bonds on January 1, 2022, for $70,000. The bonds pay interest annually on January 1. On January 1, 2023, after receipt of interest, Blossom Company sold 40 of the bonds for $37,800.
Blossom Company purchased 70 Rinehart Company 5%, 10-year, $1,000 bonds on January 1, 2022, for $70,000. The bonds pay interest annually on January 1. On January 1, 2023, after receipt of interest, Blossom Company sold 40 of the bonds for $37,800.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Investment Scenario Analysis: Blossom Company's Bond Transactions**
**Overview:**
Blossom Company engaged in a financial transaction involving corporate bonds. On January 1, 2022, the company purchased 70 bonds from Rinehart Company. These bonds were characterized by the following features:
- **Interest Rate:** 5%
- **Maturity Duration:** 10 years
- **Face Value:** $1,000 per bond
- **Total Purchase Price:** $70,000
**Interest Details:**
The bonds provide annual interest payments, distributed every January 1st.
**Subsequent Transaction:**
On January 1, 2023, after receiving the annual interest payment, Blossom Company decided to sell a portion of its bond holdings. The company sold 40 out of the 70 bonds for a total of $37,800.
This scenario provides a practical example of bond investment, illustrating aspects such as initial purchase, interest payment, and the subsequent sale of securities.
Transcribed Image Text:**Journal Entry Form for Transaction Recording**
This template is used to prepare journal entries for recording financial transactions. Here is a detailed breakdown of the form fields:
---
**Instructions:**
- List all debit entries before credit entries.
- Credit account titles are automatically indented when the amount is entered. Do not indent manually.
- If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.
- Record journal entries in the order presented in the problem.
---
### Form Fields:
**1. Date:**
- A dropdown menu to select the date of the transaction.
**2. Account Titles and Explanation:**
- A text field to enter the name of the account and a brief explanation of the transaction.
**3. Debit:**
- A field to enter the debit amount for the transaction.
**4. Credit:**
- A field to enter the credit amount for the transaction.
---
### Additional Guidance:
- **To record receipt of interest:**
- Utilize this line to indicate entries related to interest income.
- **To record sale of bonds:**
- Use this section for journal entries pertaining to bond sales.
---
This structured approach ensures clarity and accuracy in maintaining financial records, crucial for accounting purposes.
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