Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Chapter E, Problem E.23AE
1.
To determine
To Identify: The method that should be used by Incorporation B to accounts for its investment in Corporation W bonds.
2.
To determine
To Prepare: The
3.
To determine
To Explain: The way Incorporation would report bond investment on its balance sheet at the year end, December 31.
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Determine the purchase price of the following debt securities that Ace Company intends to purchase:
a. 10%, P5,000,000 face value, five-year bonds dated June 30, 2020, for purchase on July 1, 2020, interest payment dates are June 30 and December 31.
b. 6% P10,000,000 face value, ten-year bonds, dated June 30, 2018, for purchase on July 1, 2020, interest payment date is June 30.
The market rate of interest on July 1, 2020 is 8%.
On January 1, 2020, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received January 1 of each year. Roosevelt's business model is to hold these bonds to collect contractual cash flows.
Instructions
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare a bond amortization schedule.
c. Prepare the journal entry to record the interest revenue and the amortization for 2020.
d. Prepare the journal entry to record the interest revenue and the amortization for 2021.
On January 1, 2024, the Steward's Restaurant decides to invest in Lake Redburgh bonds. The bonds mature on December 31, 2027, and
pay interest on June 30 and December 31 at 5% annually. The market rate of interest was 5% on January 1, 2024, so the $120,000
maturity value bonds sold for face value. Steward's intends to hold the bonds until December 31, 2027.
Requirements
1. Journalize the transactions related to Steward's investment in Lake Redburgh bonds during 2024.
In what category would Steward's report the investment on the December 31, 2024, balance sheet?
2.
Requirement 1. Journalize the transactions related to Steward's investment in Lake Redburgh bonds during 2024. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
Begin by journalizing Steward's investment in Lake Redburgh bonds on January 1, 2024.
Accounts and Explanation
Debit
Date
2024
Jan. 1
Credit
Chapter E Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. E - Prob. 1QCCh. E - Rolling Hills Productions held investments in...Ch. E - Prob. 3QCCh. E - Crandall's investment is in less than 2% of...Ch. E - Dumois Corporation purchased 1,500 shares of...Ch. E - Prob. 6QCCh. E - Use the Dumois Corporation data in question 5....Ch. E - Prob. 8QCCh. E - Prob. 9QCCh. E - Prob. 10QC
Ch. E - Prob. E.1SCh. E - (Learning Objective 2: Account for investments in...Ch. E - Prob. E.3SCh. E - Prob. E.4SCh. E - Prob. E.5SCh. E - Prob. E.6SCh. E - Prob. E.7SCh. E - Prob. E.8SCh. E - Prob. E.9SCh. E - Prob. E.10SCh. E - (Learning Objective 5: Record a held-to-maturity...Ch. E - Prob. E.12SCh. E - (Learning Objective 5: Calculate and record...Ch. E - Prob. E.14SCh. E - Prob. E.15SCh. E - Prob. E.16SCh. E - Prob. E.17AECh. E - (Learning Objective 2: Record transactions for...Ch. E - (Learning Objective 2: Analyze and report...Ch. E - Prob. E.20AECh. E - Prob. E.21AECh. E - Prob. E.22AECh. E - Prob. E.23AECh. E - Prob. E.24BECh. E - Prob. E.25BECh. E - (Learning Objective 2: Analyze and report...Ch. E - (Learning Objective 3: Account for transactions...Ch. E - Prob. E.28BECh. E - Prob. E.29BECh. E - Prob. E.30BECh. E - Prob. E.31QCh. E - Prob. E.32QCh. E - Prob. E.33QCh. E - Prob. E.34QCh. E - Prob. E.35QCh. E - Dividends received on an equity-method investment...Ch. E - Prob. E.37QCh. E - Prob. E.38QCh. E - Prob. E.39APCh. E - (Learning Objectives 2, 3: Analyze and report...Ch. E - (Learning Objectives 2, 3: Analyze and report...Ch. E - Prob. E.42APCh. E - Prob. E.43BPCh. E - LO 2, 3 (Learning Objectives 2, 3: Analyze and...Ch. E - Prob. E.45BPCh. E - Prob. E.46BPCh. E - Prob. E.47DC
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