On January 1, 2020, Teal Company purchased 9% bonds having a maturity value of $370,000, for $400,342.96. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Teal Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021. (Round answers to 2 decimalplaces, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry isrequired, select "No Entry" for the account titles and enter O for the amounts.)DateAccount Titles and ExplanationDebitCreditDec. 31,2021

Interest receivable = face value of investment x interest rate = 370,000 x 9% = $33300DATE ACCOUNTS DEBIT CREDIT Dec. 31, 2021 Interest receivable $33300 Interest revenue (400,342.96*7%) 27655 Held-to-maturity Investment (balancing figure) 5645 (To record the interest revenue and the amortization)

Answered: On January 1, 2020, Teal Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2020, Teal Company purchased 9% bonds having a maturity value of $370,000, for $400,342.96. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Teal Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021. (Round answers to 2 decimal
places, e.g. 2,525.25. 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.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31,
2021

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