On July 1, 2023 Monty Ltd. purchased 7% bonds having a maturity value of $115,000 for $111,129. The bonds provide thebondholders with a 8% yield. The bonds mature four years later, on July 1, 2027, with interest receivable June 30 and December 31 ofeach year. Monty uses the effective interest method to allocate any unamortized discount or premium. The bonds are accounted forusing the FV-OCI model with recycling. Monty has a calendar year end and the fair value of the bonds at December 31, 2023 and 2024was $111,900 and $112,430 respectively. Assume fair value adjustments are recorded at year end only. Immediately after collectinginterest on December 31, 2024, the bonds were sold for $112,430.(a)Your answer is correct.Prepare the journal entry at the date of the bond purchase. (Credit account titles are automatically indented when the amount isentered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entrybefore credit entry. Round answers to O decimal places, e.g. 5,275.)DateJuly 1,2023Account Titles and ExplanationFV-OCI InvestmentsCashDebit111129Credit111129 Prepare the year end adjusting entry at December 31, 2023 and June 30, 2024. (Credit account titles are automatically indentedwhen the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for theamounts. List all debit entries before credit entries. Round answers to O decimal places, e.g. 5,275.)DateDec. 31, 2023June 30, 2024Account Titles and Explanation(To record fair value adjustment)(To record collection of interest)DebitCre

A) Journal entry at the date of bond purchase on July 1, 2023: Investment in Bonds $111,129…

On July 1, 2023 Monty Ltd. purchased 7% bonds having a maturity value of $115,000 for $111,129. The bonds provide the bondholders with a 8% yield. The bonds mature four years later, on July 1, 2027, with interest receivable June 30 and December 31 of each year. Monty uses the effective interest method to allocate any unamortized discount or premium. The bonds are accounted for using the FV-OCI model with recycling. Monty has a calendar year end and the fair value of the bonds at December 31, 2023 and 2024 was $111,900 and $112,430 respectively. Assume fair value adjustments are recorded at year end only. Immediately after collecting interest on December 31, 2024, the bonds were sold for $112,430.

On July 1, 2023 Monty Ltd. purchased 7% bonds having a maturity value of $115,000 for $111,129. The bonds provide the bondholders with a 8% yield. The bonds mature four years later, on July 1, 2027, with interest receivable June 30 and December 31 of each year. Monty uses the effective interest method to allocate any unamortized discount or premium. The bonds are accounted for using the FV-OCI model with recycling. Monty has a calendar year end and the fair value of the bonds at December 31, 2023 and 2024 was $111,900 and $112,430 respectively. Assume fair value adjustments are recorded at year end only. Immediately after collecting interest on December 31, 2024, the bonds were sold for $112,430.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On January 1, 2020, Hummer Company purchased 7% bonds, having a maturity value of $500,000, for $570,000. The bonds provide the bondholders with a 5% yield. They are dated January 1, 2020, and mature January 1, 2030, with interest receivable June 30 and December 31 of each year. Hummer Company uses the effective- interest method to allocate any unamortized discount or premium. The bonds are classified in the held-to-maturity category. Instructions: 1. Prepare the journal entry at the date of the bond purchase. 2. Prepare the first 3 years of a bond amortization schedule. 3. Prepare the journal entries to record the interest received and the amortization for 2020.
On January 1, 2021, Loop Raceway issued 500 bonds, each with a face value of $1,000, a stated interest rate of 7 percent paid annually on December 31, and a maturity date of December 31, 2023. On the issue date, the market interest rate was 8 percent, so the total proceeds from the bond issue were $487,099. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare a bond amortization schedule. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired early on January 1, 2023 instead of at their maturity date of 12/31/2023, record the entry to retire the bonds early assuming a price of 99.
On January 1, 2023, Larkspur Corporation purchased a newly issued $1,500,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Larkspur's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) the price paid for the bond is $ 1,421,367.95
Novak Corp. redeemed $148,000 face value, 12% bonds on April 30, 2022, at 102. The carrying value of the bonds at the redemption date was $134,500. The bonds pay annual interest, and the interest payment due on April 30, 2022, has been made and recorded. Prepare the appropriate journal entry for the redemption of the bonds.
Ellis Company issues 6.5%, five-year bonds dated January 1, 2021, with a $250,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $255,333. The annual market rate is 6% on the issue date. Required: 1. Compute the total bond interest expense over the bonds' life. 2. Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments.
The Gonzalez Group issued $830,000 of 9% bonds on June 30, 2024, for $912,141. • The bonds were dated on June 30 and mature on June 30, 2044 (20 years). • The market yield for bonds of similar risk and maturity is 8%. • Interest is paid semiannually on December 31 and June 30. Required: 1. to 3. Prepare the journal entries to record their issuance by The Gonzalez Group on June 30, 2024, interest on December 31, 2024 and interest on June 30, 2025 (at the effective rate). Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet 1 2 3 Record the issuance of the bond on June 30, 2024. Date June 30, 2024 Note: Enter debits before credits. General Journal Debit Credit
On January 1, 2021, Solis Co. issued its 10% bonds in the face amount of P3,000,000, which mature on January 1, 2026. The bonds were issued for P3,405,000 to yield 8%, resulting in bond premium of P405,000. Solis uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. At December 31, 2021, the carrying value of the bonds should be a.) P3,405,000 b.) P3,377,400 c.) P3,364,500 d.) P3,304,500
On January 1, 2022, Ehrlich Corporation issued 7%, 15-year bonds with a face amount of $4,800,000 . Instructions Prepare the following entries: record the issuance of the bonds on 1/1/22, assuming the bonds were issued at 102 record the issuance of the bonds on 1/1/22, assuming the bonds were issued at 100 prepare the entry for the redemption of the bonds at maturity calculate the total cost of borrowing for these bonds, assuming they are issued at 100
Grocery Corporation received $300,328 for 11 percent bonds issued on January 1, 2021, at a market interest rate of 8 percent. The bonds had a total face value of $250,000, stated that interest would be paid each December 31, and stated that they mature in 10 years. Assume Grocery Corporation uses the effective-interest method to amortize the bond premium. Required: 1. & 2. Prepare the required journal entries to record the bond issuance and the first interest payment on December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar.) 1. Record the issuance of bonds with a face value of $250,000 for $300,328. 2. Record the interest payment on December 31.
On January 1, 2020, Wildhorse Company purchased 8% bonds having a maturity value of $ 360,000, for $ 390,329.57. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Wildhorse Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020. (Round answers to 2 decimal places, e.g. 2,525.25. 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 0 for the amounts.)
Cullumber Company sold $2,000,000, 4%, 10-year bonds on January 1, 2022. The bonds were dated January 1 and pay interest annually on January 1. Cullumber Company uses the straight-line method to amortize bond premium or discount. The bonds were sold at 101. (c) Prepare the journal entries for interest and the amortization of the premium in 2022 and 2023. (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 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2022 enter an account title for the journal entry on december 31, 2022 enter a debit amount enter a credit amount enter an account title for the journal entry on december 31, 2022 enter a debit amount enter a credit amount enter an account title for the journal entry on december 31, 2022 enter a debit amount enter a credit amount…
Ellis Company issues 8.0%, five-year bonds dated January 1, 2021, with a $530,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $540,871. The annual market rate is 7.5% on the issue date. Required: 1. Compute the total bond interest expense over the bonds' life. 2. Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments. Please need answer for all with working please answer do not waste time or question by holding attempt if you can otherwise skip