On January 1, Year 1, Reid Corporation acquired bonds with a face value of $500,000 for $481,156.15. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on June 30 and December 31, were purchased to be held to maturity, and are due December 31, Year 4. On January 1, Year 2, in contemplation of a major acquisition, the bonds were sold for $500,000. Reid uses the effective interest method. Required: Prepare journal entries to record the purchase of the bonds, the interest receipts on June 30, Year 1, and December 31, Year 2, and the sale of the bonds.

On January 1, Year 1, Reid Corporation acquired bonds with a face value of $500,000 for $481,156.15. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on June 30 and December 31, were purchased to be held to maturity, and are due December 31, Year 4. On January 1, Year 2, in contemplation of a major acquisition, the bonds were sold for $500,000. Reid uses the effective interest method. Required: Prepare journal entries to record the purchase of the bonds, the interest receipts on June 30, Year 1, and December 31, Year 2, and the sale of the bonds.

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 1E: Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount....

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On November 1, 2018, Reid Corporation acquired bonds with a face value of $1,000,000 for $963,199.78. The bonds carry a stated rate of interest of 11%, were purchased to yield 12%, pay interest semiannually on April 30 and October 31, were purchased to be held to maturity, and are due October 31, 2022. On November 1, 2019, in contemplation of a major acquisition, the bonds were sold for $1,000,000. Reid is on a fiscal year accounting period ending October 31 and uses the effective interest method. Required: Prepare journal entries to record the purchase of the bonds, the interest receipts on April 30, 2019, and October 31, 2019, and the sale of the bonds.
Gonzalez Company acquired $200,000 of Walker Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1,Gonzalez Company sold $70,000 of the bonds for 97.Journalize entries to record the following in Year 1:a. The initial acquisition of the bonds on May 1.b. The semiannual interest received on November 1.c. The sale of the bonds on November 1.d. The accrual of $1,300 interest on December 31.
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