On January 1, 2025, Crane Company purchased 12% bonds having a maturity value of $308,000 for $331,350.96. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Crane Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2025 $329,000 2028 $316,900 2026 $316,200 2029 $308,000 2027 $315,100 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. 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. Round answers to 2 decimal places, e.g. 1225.25.) No. Date Account Titles and Explanation Debit Credit

Principles of Accounting Volume 1
19th Edition
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Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PB: Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1,...
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On January 1, 2025, Crane Company purchased 12% bonds having a maturity value of $308,000 for $331,350.96. The bonds provide
the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of
each year. Crane Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified
as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.
2025 $329,000 2028
$316,900
2026
$316,200
2029
$308,000
2027
$315,100
(a)
Prepare the journal entry at the date of the bond purchase.
(b)
Prepare the journal entries to record the interest revenue and recognition of fair value for 2025.
(c)
Prepare the journal entry to record the recognition of fair value for 2026.
(List all debit entries before credit entries. 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. Round answers to 2 decimal places, e.g. 1225.25.)
No.
Date
Account Titles and Explanation
Debit
Credit
Transcribed Image Text:On January 1, 2025, Crane Company purchased 12% bonds having a maturity value of $308,000 for $331,350.96. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Crane Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2025 $329,000 2028 $316,900 2026 $316,200 2029 $308,000 2027 $315,100 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. 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. Round answers to 2 decimal places, e.g. 1225.25.) No. Date Account Titles and Explanation Debit Credit
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