MISM On January 2, 2020, Mark Company acquired, as a held-to-maturity investment, bonds with a face value of $750,000 for $861,600 The bonds carry a stated interest rate of 8% and an effective yield of 6% Interest is paid on June 30 and December 31, and the bonds mature on December 31, 2029, Required: Prepare the journal entries necessary to record the purchase of the bonds and the first two semi-annual interest receipts using the straight-line method of amortization

MISM On January 2, 2020, Mark Company acquired, as a held-to-maturity investment, bonds with a face value of $750,000 for $861,600 The bonds carry a stated interest rate of 8% and an effective yield of 6% Interest is paid on June 30 and December 31, and the bonds mature on December 31, 2029, Required: Prepare the journal entries necessary to record the purchase of the bonds and the first two semi-annual interest receipts using the straight-line method of amortization

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Ike issues $180,000 of 11%, three-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. They are issued at $184,566 when the market rate is 10%. Required 1. Prepare the January 1 journal entry to record the bonds’ issuance. 2. Determine the total bond interest expense to be recognized over the bonds’ life. 3. Prepare an effective interest amortization table for the bonds’ first two years. 4. Prepare the journal entries to record the first two interest payments.
Mercer Corporation acquired $400,000 of Park Company’s bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semiannually on June 30 and December 31. The appropriate market interest rate is 11%, and the bonds are due June 30, 2021. Required: 1. Prepare an investment interest income and premium amortization schedule, using the: a. straight-line method b. effective interest method 2. Prepare journal entries to record the December 31, 2018, and December 31, 2020, interest receipts using both methods.
On January 1, 2020, Flint Company purchased at par 6% bonds having a maturity value of $340,000. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. The bonds are classified in the held-to-maturity category. (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entry to record the interest revenue on December 31, 2020. (c) Prepare the journal entry to record the interest received on January 1, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Account Titles and Explanation Debit Credit (a) (b) (c)
Hernandez company issued $380,000, 7%, 10-year bonds on January 1, 2022, for $407,968. this price resulted in an effective-interest rate of 6% on the bonds. interest is payable annually on January 1. hernandex]z uses the effective-interest method to amortize bond premium or discount. prepare the journal entry to record the accrual interest and the premium amortization on December 31, 2022.
On January 1, 2019, Drennen Inc. issued $5 million face amount of 10-year, 14% stated rate bonds when market interest rates were 12%. The bonds pay semiannual interest each June 30 and December 31 and mature on December 31, 2028. Table 6-4, Table 6-5 (Use appropriate factor from the table provided.) Required:a. Calculate the proceeds (issue price) of Drennen Inc.'s bonds on January 1, 2019, assuming that the bonds were sold to provide a market rate of return to the investor. (Round PV factor to 4 decimal places.) b-1.Assume instead that the proceeds were $4,820,000. Use the horizontal model to record the payment of semiannual interest and the related discount amortization on June 30, 2019, assuming that the discount of $180,000 is amortized on a straight-line basis. Indicate the financial statement effect.(Enter decreases with a minus sign to indicate a negative financial statement effect.) b-2. Assume instead that the proceeds were $4,820,000. Record the journal entry to show the…
On January 1, 2019, Rodgers Company purchased $200,000 face value, 10%, 3-year bonds for $190,165.35, a price that yields a 12% effective annual interest rate. The bonds pay interest semiannually on June 30 and December 31. Required: 1. Record the purchase of the bonds. 2. Prepare an investment interest income and discount amortization schedule using the effective interest method. 3. Record the receipts of interest on June 30, 2019, and June 30, 2021.
On January 1, 2019, Kelly Corporation acquired bonds with a face value of $400,000 for $386,808.18, a price that yields a 9% effective annual interest rate. The bonds carry a 8% stated rate of interest, pay interest semiannually on June 30 and December 31, are due December 31, 2022, and are being held to maturity. Required: Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the: 1. straight-line method of amortization 2. effective interest method of amortization
On January 1, 2018, Rei Company obtained $4,000,000 of 12% face value bonds at $3,767,000 to be held financial assets at amortized cost with a 14% effective yield. Interest on bonds is payable annually on December 31 and bonds mature on January 1, 2022. The effective interest method of amortization is used. The quoted price of the bonds is as follows: December 31, 2018: 97 December 31, 2019: 98 June 30, 2020: 99.a. What amount will be recognized as income on the 2018 income statement?b. What amount will be the gain (loss) on sale assuming all the bonds were sold on June 30, 2020 at 99 plus accrued interest?c. How much is the carrying amount of investment on December 31, 2018?
journal entries (Straight-line amortization) ABC Incorporated issued bonds to DEF Corporation on January 1, 2019 with following terms: 5-year maturity, annual coupon rate of 6%, pays interest on June 30 and December 31, $200,000 principal. Consider three different cases: (a) issued at par, (b) issued at 95, and (c)issued at 102. Assume that DEF Corporation intends to hold to maturity the bonds. Prepare the journal entries required on January 1, 2021, and on June 30, 2021, for both þarties. Use straight-line amortization to record interest.
On January 1, 2020, Kendall Co. purchased to hold to maturity, 1000, $1,000, 9% bonds for a price to yield an effective interest rate of 10% . Interest is paid semiannually on December 31 and June 30 and the bonds mature on December 31, 2023. What price did Kendall Company pay for this bond?
On January 1, 2020, Pronghorn Company acquires $270,000 of Spiderman Products, Inc., 9% bonds at a price of $244,500. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Pronghorn Company a 13% yield. The bonds are classified as held-to-maturity. (c) Prepare the journal entry for the interest revenue and discount amortization under the straight-line method at December 31, 2021. (d) Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2021. (Round answers to 0 decimal places, e.g. 2,500. Credit account titles are automatically indented when 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.) No. Account Titles and Explanation Debit Credit (c) (d)
Ellis Company Issues 7.0%, five-year bonds dated January 1, 2019, with a $510,000 par value. The bonds pay Interest on June 30 and December 31 and are issued at a price of $531,755. The annual market rate is 6% on the Isue date. Required: 1. Compute the total bond Interest expense over the bonds' life. 2 Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal entries to record the first two Interest payments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare an effective interest amortization table for the bonds' life. Semiannual Period- Cash Interest Bond Interest Paid Premium Amortization Unamortized Premium Carrying Value End Expense 01/01/2019 21,755 S 531,755 08/30/2019 17,850 12/31/2019 17,850 08/30/2020 12/31/2020 08/30/2021 12/31/2021 08/30/2022 12/31/2022 08/30/2023 12/31/2023 Total