On January 1, 2025, Grouper Company purchased $330,000,8 % bonds of Aguirre Co. for $304,517. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2030. Grouper Company uses the effective-interest method to amortize discount or premium. On January 1, 2027, Grouper Company sold the bonds for $306,162 after receiving interest to meet its liquidity needs. (c) Prepare the journal entries to record the semiannual interest on July 1, 2025, and December 31, 2025. (d) If the fair value of Aguirre bonds is $308,162 on December 31, 2026, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on December 31,2025, is a debit of $3,691.) (e) Prepare the journal entry to record the sale of the bonds on January 1,2027.
On January 1, 2025, Grouper Company purchased $330,000,8 % bonds of Aguirre Co. for $304,517. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2030. Grouper Company uses the effective-interest method to amortize discount or premium. On January 1, 2027, Grouper Company sold the bonds for $306,162 after receiving interest to meet its liquidity needs. (c) Prepare the journal entries to record the semiannual interest on July 1, 2025, and December 31, 2025. (d) If the fair value of Aguirre bonds is $308,162 on December 31, 2026, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on December 31,2025, is a debit of $3,691.) (e) Prepare the journal entry to record the sale of the bonds on January 1,2027.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2025, Grouper Company purchased $330,000,8 % bonds of Aguirre Co. for $304,517. The
bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1.
The bonds mature on January 1, 2030. Grouper Company uses the effective-interest method to
amortize discount or premium. On January 1, 2027, Grouper Company sold the bonds for $306,162 after
receiving interest to meet its liquidity needs. (c) Prepare the journal entries to record the semiannual
interest on July 1, 2025, and December 31, 2025. (d) If the fair value of Aguirre bonds is $308,162 on
December 31, 2026, prepare the necessary adjusting entry. (Assume the fair value adjustment balance
on December 31,2025, is a debit of $3,691.) (e) Prepare the journal entry to record the sale of the bonds
on January 1,2027.
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