On January 1, Sharp Company purchased $90,000 of Sox Company 5% bonds, at a time when the market rate was 6%. The bonds mature on December 31 in five years, and pay interest semiannually on June 30 and December 31. Sharp plans to and has the ability to hold the bonds until maturity. Assume that Sharp uses the effective interest method to amortize any premium or discount on investments in bonds. At June 30, the bonds are quoted at 98. Note: When answering the following questions, round answers to the nearest whole dollar. a. Prepare the entry for the purchase of the debt investment on January 1. Date Jan. 1 Investment in HTM Securities Interest Receivable To record the purchase of investment. Account Name Date June 30 b. Prepare the entry for the receipt of interest on June 30. Account Name To record the receipt of interest. Debit V 83,375 0 Debit 0 0 0 Credit 0x 83,375 x Credit 0x 0x 0x c. Record the entry to adjust the investment to fair value on June 30, if applicable. Note: If a journal entry isn't required for the transaction, select "N/A-Debit" and "N/A-Credit" as the account names and leave the Dr. and Cr. answers blank (zero).

On January 1, Sharp Company purchased $90,000 of Sox Company 5% bonds, at a time when the market rate was 6%. The bonds mature on December 31 in five years, and pay interest semiannually on June 30 and December 31. Sharp plans to and has the ability to hold the bonds until maturity. Assume that Sharp uses the effective interest method to amortize any premium or discount on investments in bonds. At June 30, the bonds are quoted at 98. Note: When answering the following questions, round answers to the nearest whole dollar. a. Prepare the entry for the purchase of the debt investment on January 1. Date Jan. 1 Investment in HTM Securities Interest Receivable To record the purchase of investment. Account Name Date June 30 b. Prepare the entry for the receipt of interest on June 30. Account Name To record the receipt of interest. Debit V 83,375 0 Debit 0 0 0 Credit 0x 83,375 x Credit 0x 0x 0x c. Record the entry to adjust the investment to fair value on June 30, if applicable. Note: If a journal entry isn't required for the transaction, select "N/A-Debit" and "N/A-Credit" as the account names and leave the Dr. and Cr. answers blank (zero).

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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