On January 1, 2025, Pharoah Company purchased $370,000, 8% bonds of Aguirre Co. for $341,429. 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. Pharoah Company uses the effective-interest method to amortize discount or premium. On January 1, 2027, Pharoah Company sold the bonds for $343,034 after receiving interest to meet its liquidity needs.
On January 1, 2025, Pharoah Company purchased $370,000, 8% bonds of Aguirre Co. for $341,429. 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. Pharoah Company uses the effective-interest method to amortize discount or premium. On January 1, 2027, Pharoah Company sold the bonds for $343,034 after receiving interest to meet its liquidity needs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2025, Pharoah Company purchased $370,000, 8% bonds of Aguirre Co. for $341,429. 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. Pharoah Company
uses the effective-interest method to amortize discount or premium. On January 1, 2027, Pharoah Company sold the bonds for
$343,034 after receiving interest to meet its liquidity needs.
Transcribed Image Text:(c)
(d)
(e)
Prepare the journal entries to record the semiannual interest on July 1, 2025, and December 31, 2025.
If the fair value of Aguirre bonds is $345,034 on December 31, 2026, prepare the necessary adjusting entry. (Assume
the fair value adjustment balance on December 31, 2025, is a debit of $3,257.)
Prepare the journal entry to record the sale of the bonds on January 1, 2027.
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