Presented below is an amortization schedule related to Flounder Company's 5-year, $160,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2023, for $173,855. Date 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 12/31/28 Cash Received Revenue $11,200 Fair value Amortized cost 11,200 11,200 11,200 Interest Bond Premium Amortization 11,200 $8,693 12/31/24 $171,348 8,567 8,436 170,800 8,298 8,151 $2,507 2,633 2,764 170,900 2,902 3,049 Carrying Amount of Bonds The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. $173,855 167,800 171,348 168,715 165,951 163,049 160,000 12/31/25 12/31/26 12/31/27 $168,715 $165,951 $163,049 164,100 12/31/28 $160,000 160,000
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- Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest. On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-years bonds with a face value of 12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to record the purchase of these available-for-sale securities.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.
- Presented below is an amortization schedule related to Spangler Company's 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2018, for $108,660. Date Cash Received Interest Revenue Bond PremiumAmortization Carrying Amount of Bonds 12/31/18 $108,660 12/31/19 $7,000 $5,433 $1,567 107,093 12/31/20 7,000 5,354 1,646 105,447 12/31/21 7,000 5,272 1,728 103,719 12/31/22 7,000 5,186 1,814 101,905 12/31/23 7,000 5,095 1,905 100,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $107,093 $105,447 $103,719 $101,905 $100,000 Fair value 106,500 107,500 105,650 103,000 100,000 Instructions a. Prepare the journal entry to record the purchase of these bonds on December 31, 2018, assuming…Presented below is an amortization schedule related to Flint Company's 5-year, $150,000 bond with a 7% interest rate and a 4% yield, purchased on December 31, 2023, for $170,034. Date Cash Received Interest Revenue Bond Premium Carrying Amount Amortization of Bonds 12/31/23 $170,034 12/31/24 $10,500 $6,801 $3,699 166,335 12/31/25 10,500 6,653 3,847 162,488 12/31/26 10,500 6,500 4,000 158,488 12/31/27 10,500 6,340 4,160 154,328 12/31/28 10,500 6,172 4,328 150,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/24 12/31/25 12/31/26 12/31/27 12/31/28 Amortized cost $166,335 $162,488 $158,488 $154,328 $150,000 Fair value 165,800 164,700 160,400 155,400 150,000 (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2023, assuming the bonds are classified as held-to-maturity securities. (b) Prepare the journal entry related to the held-to-maturity bonds for 2024. (c) Prepare the journal entry…1. Sandhill Company purchased, on January 1, 2025, as an available-for-sale security, $440,000 of the 6%, 5-year bonds of Oak Corporation for $380,203, which provides an 8% return. The bonds pay interest semi-annually on June 30th and December 31st. For this case, prepare an amortization table. Use the effective-interest method for discount and premium amortization (construct an amortization table). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.) Maturity Value of Bonds Purchase Price of Bonds Stated Interest Rate Bond Yield Rate Interest Payment Term (fraction of annual) Date Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds 1/1/2025 6/30/2025 12/31/2025 6/30/2026 12/31/2026 6/30/2027 12/31/2027 6/30/2028 12/31/2028 6/30/2029 12/31/2029 6/30/2030…
- Presented below is an amortization schedule related to Shamrock Company’s 5-year, $150,000 bond with a 8% interest rate and a 5% yield, purchased on December 31, 2018, for $169,484. Date CashReceived InterestRevenue Bond PremiumAmortization Carrying Amountof Bonds 12/31/18 $169,484 12/31/19 $12,000 $8,474 $3,526 165,958 12/31/20 12,000 8,298 3,702 162,256 12/31/21 12,000 8,113 3,887 158,369 12/31/22 12,000 7,918 4,082 154,287 12/31/23 12,000 7,713 4,287 150,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $165,958 $162,256 $158,369 $154,287 $150,000 Fair value $165,400 $164,500 $160,200 $155,500 $150,000 (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2018,…Presented below is an amortization schedule related to Bramble Company’s 5-year, $ 170,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2018, for $ 185,137. Date CashReceived InterestRevenue Bond PremiumAmortization Carrying Amountof Bonds 12/31/18 $ 185,137 12/31/19 $ 10,200 $ 7,405 $ 2,795 182,342 12/31/20 10,200 7,294 2,906 179,436 12/31/21 10,200 7,177 3,023 176,413 12/31/22 10,200 7,057 3,143 173,270 12/31/23 10,200 6,930 3,270 170,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $ 182,342 $ 179,436 $ 176,413 $ 173,270 $ 170,000 Fair value $ 181,700 $ 181,600 $ 178,300 $ 174,400 $ 170,000 (a) Prepare the journal entry to record the purchase of these bonds on…Presented below is an amortization schedule related to Teal Company’s 5-year, $130,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2018, for $141,575. Date CashReceived InterestRevenue Bond PremiumAmortization Carrying Amountof Bonds 12/31/18 $141,575 12/31/19 $7,800 $5,663 $2,137 139,438 12/31/20 7,800 5,578 2,222 137,216 12/31/21 7,800 5,489 2,311 134,905 12/31/22 7,800 5,396 2,404 132,501 12/31/23 7,800 5,299 2,501 130,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $139,438 $137,216 $134,905 $132,501 $130,000 Fair value $138,900 $139,500 $137,000 $133,600 $130,000 (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2018, assuming the…
- Presented below is an amortization schedule related to Bramble Company’s 5-year, $ 170,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2018, for $ 185,137. Date CashReceived InterestRevenue Bond PremiumAmortization Carrying Amountof Bonds 12/31/18 $ 185,137 12/31/19 $ 10,200 $ 7,405 $ 2,795 182,342 12/31/20 10,200 7,294 2,906 179,436 12/31/21 10,200 7,177 3,023 176,413 12/31/22 10,200 7,057 3,143 173,270 12/31/23 10,200 6,930 3,270 170,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $ 182,342 $ 179,436 $ 176,413 $ 173,270 $ 170,000 Fair value $ 181,700 $ 181,600 $ 178,300 $ 174,400 $ 170,000 (d) Prepare the journal entry to record the purchase…Mercer Corporation acquired $400,000 of Park Company’s bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semiannually on June 30 and December 31. The appropriate market interest rate is 11%, and the bonds are due June 30, 2021. Required: 1. Prepare an investment interest income and premium amortization schedule, using the: a. straight-line method b. effective interest method 2. Prepare journal entries to record the December 31, 2018, and December 31, 2020, interest receipts using both methods.Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2019. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12%, and are due January 1, 2022. Required: 1. Prepare an investment interest income and discount amortization schedule using the: a. straight-line method b. effective interest method 2. Prepare the July 1, 2021, journal entries to record the interest income under both methods.