On January 1, 2020, Hummer Company purchased 5% bonds, havinga maturity value of $500,000, for $428,938. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2020, and mature January 1, 2030, with interest receivable June 30 and December 31 of each year. Hummer Company uses the effective-interest method to allocate unamortized discount or premium. 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 first 3 years of a bond amortization schedule.(c) Prepare the journal entries to record the interest received and the amortization for 2020.
On January 1, 2020, Hummer Company purchased 5% bonds, havinga maturity value of $500,000, for $428,938. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2020, and mature January 1, 2030, with interest receivable June 30 and December 31 of each year. Hummer Company uses the effective-interest method to allocate unamortized discount or premium. 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 first 3 years of a bond amortization schedule.(c) Prepare the journal entries to record the interest received and the amortization for 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Hummer Company purchased 5% bonds, having
a maturity value of $500,000, for $428,938. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2020, and mature January 1, 2030, with interest receivable June 30 and December 31 of each year. Hummer Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
(a) Prepare the
(b) Prepare the first 3 years of a bond amortization schedule.
(c) Prepare the journal entries to record the interest received and the amortization for 2020.
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