Metro Company purchased $100,000, 10%, 5-year bonds on January 1, 20x1, with interest payable on July 1 and January 1. The bonds sold for $108,111, which results in an effective interest rate of 8%. The market value on December 31, 20x1 was $105,000 and all bonds were sold for $107,500 on January 1, 20x2 before the scheduled payment is made. Required: assuming that the bond investment is classified as available-for-sale security, prepare journal entries on the following dates: January 1, 20x1: July 1, 20x1: December 31, 20x1: January 1, 20x2:
Metro Company purchased $100,000, 10%, 5-year bonds on January 1, 20x1, with interest payable on July 1 and January 1. The bonds sold for $108,111, which results in an effective interest rate of 8%. The market value on December 31, 20x1 was $105,000 and all bonds were sold for $107,500 on January 1, 20x2 before the scheduled payment is made. Required: assuming that the bond investment is classified as available-for-sale security, prepare journal entries on the following dates: January 1, 20x1: July 1, 20x1: December 31, 20x1: January 1, 20x2:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Metro Company purchased $100,000, 10%, 5-year bonds on January 1, 20x1, with interest
payable on July 1 and January 1. The bonds sold for $108,111, which results in an effective
interest rate of 8%. The market value on December 31, 20x1 was $105,000 and all bonds were
sold for $107,500 on January 1, 20x2 before the scheduled payment is made.
Required: assuming that the bond investment is classified as available-for-sale security, prepare
January 1, 20x1:
July 1, 20x1:
December 31, 20x1:
January 1, 20x2:
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