FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Accounting for debt instruments purchased at a discount
- FV-NI model
On January 1, 2023, Pluto Corp. which follows ASPE
acquired 6%, $100,000 (face value) bonds of Uranus Ltd.,
to yield 8%. The bonds were dated January 1, 2023, and
mature on December 31, 2028, with interest payable
each January 1. Pluto intends to hold the bonds to
maturity and will use the FV-NI model and the effective
interest method of amortization of bond premium or
discount.
Instructions
Prepare the following entries in Pluto's books:
a) Acquisition of bonds on January 1, 2023,
b) Year-end adjusting entry at December 31, 2023,
c) Receipt of the first interest payment on January 1,
2024.
Round all values to the nearest dollar.
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