On November 1, 2021, Sheridan Company purchased Pina, Inc., 10-year, 9%, bonds with a face value of $ 850000, for $ 770000. An additional $ 29000 was paid for the accrued interest. Interest is payable semiannually on January 1 and July 1. The bonds mature on July 1, 2028. Sheridan uses the straight-line method of amortization. Ignoring income taxes, the amount reported in Sheridan's 2021 income statement as a result of Sheridan's available-for-sale investment in Pina was $ 7975. $ 10525. $ 11250. $ 9250.

On November 1, 2021, Sheridan Company purchased Pina, Inc., 10-year, 9%, bonds with a face value of $ 850000, for $ 770000. An additional $ 29000 was paid for the accrued interest. Interest is payable semiannually on January 1 and July 1. The bonds mature on July 1, 2028. Sheridan uses the straight-line method of amortization. Ignoring income taxes, the amount reported in Sheridan's 2021 income statement as a result of Sheridan's available-for-sale investment in Pina was $ 7975. $ 10525. $ 11250. $ 9250.

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

Pharoah Company purchased $3200000 of 9%, 5-year bonds from Wildhorse, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $3320740 at an effective interest rate of 8%. Using the effective-interest method, Pharoah Company decreased the Available-for-Sale Debt Securities account for the Wildhorse, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $11020 and $11380, respectively.At April 1, 2022, Pharoah Company sold the Wildhorse bonds for $3290000. After accruing for interest, the carrying value of the Wildhorse bonds on April 1, 2022 was $3297440. Assuming Pharoah Company has a portfolio of Available-for-Sale Debt Securities, what should Pharoah Company report as a gain or loss on the bonds?
* Your answer is incorrect. On November 1, 2025, Crane Company purchased Bramble, Inc., 10-year, 8%, bonds with a face value of $790000, for $710000. An additional $23000 was paid for the accrued interest. Interest is payable semiannually on January 1 and July 1. The bonds mature on July 1, 2030. Crane uses the straight-line method of amortization. Ignoring income taxes, the amount reported in Crane's 2025 income statement as a result of Crane's available-for-sale investment in Bramble was ● $7243. $8600. ● $11457. O $9957.
Oso Company purchased a Costco bond for $40,000 on January 1, 2020 at face value with an interest rate of 3% paid and recorded annually on 12/31. Oso Company treats the bond as an available-for-sale investment. 1. On 12/31/20, Oso Company records ALL the entries related to this investment. The fair value of the bond is $45,000. Assume no entries have been recorded to date after the 1/1/20 purchase. Answer the following questions for Oso: a. How much is the investment valued at on Oso's balance sheet? Why is it valued at this amount? b. How much does Oso's net income change by for all entries recorded on 12/31/20 related to this bond? Include the amount and direction. If no change, write no change. 2. On 12/31/21, Oso Company records ALL the entries related to this investment. The fair value of the bond is $42,000. Assume no entries have been recorded since 12/31/20. Answer the following questions for Oso: a. Record the journal entry for any fair value adjustments that are needed. If no…
On July 1, 2020, West Company purchased for cash, ten $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature on July 1, 2023. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Note: Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Adjust market interest in the final year of the bond term for any net rounding difference.
On November 1, 2015, Journeyman, LLC purchased 900 of the $1,000 face value, 9% bonds of Celebration Incorporated, for $948,000, including accrued interest of $13,500. The bonds matured on January 1, 2017, and interest was paid on March 1 and September 1. If Journeyman uses the straight-line method of amortization and the bonds are classified as available-for-sale, how should the net carrying value of the bonds be shown on Journeyman’s December 31, 2015 balance sheet?
Cullumber Company purchased $3050000 of 9%, 5-year bonds from Vaughn, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $3173740 at an effective interest rate of 8%. Using the effective-interest method, Cullumber Company decreased the Available-for-Sale Debt Securities account for the Vaughn, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $10720 and $11080, respectively.At April 1, 2022, Cullumber Company sold the Vaughn bonds for $3140000. After accruing for interest, the carrying value of the Vaughn bonds on April 1, 2022 was $3147440. Assuming Cullumber Company has a portfolio of Available-for-Sale Debt Securities, what should Cullumber Company report as a gain or loss on the bonds? $-7440. $-123740. $-21800. $ 0.
On January 1, 2024, Morrison Inc., a public company, purchased $600,000 of Pearl Corporation's five-year, 4% bonds for $627,660 when the market interest rate was 3%. Interest is received semi-annually on July 1 and January 1. Morrison's year end is December 31. Morrison intends to hold Pearl's bonds until January 1, 2029, the date the bonds mature. The bonds' fair value on December 31, 2024, was $620,000. Instructions Record the purchase of the bonds on January 1, 2024. Prepare the entry to record the receipt of interest on July 1, 2024. Prepare the adjusting entry required at December 31, 2024. Show the financial presentation of the bonds for Morrison on December 31, 2024. Prepare the entry to record the receipt of interest on January 1, 2025. Prepare the entry to record the receipt on maturity of the bonds on January 1, 2029. Assume the entry to record the last interest payment has been recorded.
On July 1, 2020, West Company purchased for cash, ten $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature on July 1, 2023. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. d. Record the receipt of interest on January 1, 2021. e. Record the sale of all of the bonds on January 2, 2021, for $99,600. f. Record the adjustment to the Fair Value Adjustment account on December 31, 2021, assuming no additional TS investments. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar.
Sheridan Company purchased $1250000 of 8 %, 5-year bonds from Pina, Inc. on January 1, 2025, with interest payable on July 1 and January 1. The bonds sold for $1299896 at an effective interest rate of 7%. Using the effective interest method, Sheridan decreased the Available for - Sale Debt Securities account for the Pina bonds on July 1, 2025 and December 31, 2025 by the amortized premiums of $4748 and $4892, respectively. At December 31, 2025, the fair value of the Pina bonds was $1317000. What should Sheridan report as other comprehensive income and as a separate component of stockholders' equity (assuming that this is Sheridan's first investment in available - for - sale debt securities)? Select answer from the options below $0 $26744 $9640 $17104
On January 1, 2020, Splish Company purchased $300,000, 6% bonds of Cabana Co. for $313,128. The bonds were purchased to yield 5% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Splish Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Splish Company sold the bonds for $305,400 after receiving interest to meet its liquidity needs. (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (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 O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020
On July 1, 2020, West Company purchased for cash, ten $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature on July 1, 2023. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. b. Record the entry for the purchase of the bonds by West Company on July 1, 2020. c. Record the adjusting entries by West Company on December 31, 2020 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on December 31, 2020, was $99,600. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar.
Flounder Corp. purchased $276,000 of five-year, 7% Hydrocor bonds at 99 on June 30, 2024. Flounder Corp. purchased the bonds to earn interest. Interest is paid semi-annually each June 30 and December 31. The semi-annual amortization amount for the first interest period is $234 determined using the effective-interest method. At December 31, 2024, the bonds were trading at 98. Prepare the required journal entries on June 30 and December 31, 2024. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles (To record receipt of interest.) > (To record fair value adjustment.) Debit Credit