Suppose Ritter Brothers purchases $1,200,000 of 7% annual bonds of Buster Brown Corporation at face value on January 1, 2024. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2028. Ritter intends to hold the Buster Brown bond investment until maturity. Read the requirements Requirement 1. Journalize Ritter Brothers' transactions related to the bonds for 2024. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing Ritter Brothers' investment on January 1, 2024. Date Accounts and Explanation 2024 Jan 1 Held-to-Maturity Debt Investments Purchased investment in bonds Next, journalize the receipt of cash interest on June 30, 2024, Accounts and Explanation Date 2024 Jun 30 Cash Date Received cash interest Journalize the receipt of cash interest on December 31, 2024. Accounts and Explanation 2024 Dec 31 Cash Interest Revenue. Cash Interest Revenue Debit 1200000 Debit 42000 Debit 42000 Credit 1200000 Credit 42000 Credit 42000

Suppose Ritter Brothers purchases $1,200,000 of 7% annual bonds of Buster Brown Corporation at face value on January 1, 2024. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2028. Ritter intends to hold the Buster Brown bond investment until maturity. Read the requirements Requirement 1. Journalize Ritter Brothers' transactions related to the bonds for 2024. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing Ritter Brothers' investment on January 1, 2024. Date Accounts and Explanation 2024 Jan 1 Held-to-Maturity Debt Investments Purchased investment in bonds Next, journalize the receipt of cash interest on June 30, 2024, Accounts and Explanation Date 2024 Jun 30 Cash Date Received cash interest Journalize the receipt of cash interest on December 31, 2024. Accounts and Explanation 2024 Dec 31 Cash Interest Revenue. Cash Interest Revenue Debit 1200000 Debit 42000 Debit 42000 Credit 1200000 Credit 42000 Credit 42000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 6E: Investment Premium Amortization Schedule On January 1, 2019, Lynch Company acquired 13% bonds with a...

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Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
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