FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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On January 1, 2019, Mark Corporation purchased bonds with a face value of $500,000 for $475,413.60. The bonds are due December 31, 2021, carry a 10% stated rate, and were purchased to yield 12%. interest is payable semiannually on June 30 and December 31. On January 1, 2021, in contemplation of a major acquisition,one-fourth of the bonds were sold for $127,000. The remainder were held until maturity.
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- An investor company purchased $491,000 of 8% bonds from the investee company on January 1, 2020, with interest payable on December 31. The bonds were classified as Available-for-Sale. The bonds sold for $755,470. Using the effective-interest method, the investor company revised the Available-for-Sale Debt Securities account on December 31, 2020 by the amortized discount/premium of $6,910. At December 31, 2020, the fair value of the investee company bonds was $928,000. What is the amount of unrealized holding gain/loss related to this investment in 2020? (Very important: Just enter the amount. DO NOT put a plus or minus sign in front of the amount.)arrow_forwardOn July 1, 2020, West Company purchased for cash, ten $10,000 bonds of North Corporation to yield 10%. The bonds pay 9% interest, payable on a semiannual basis each July 1 and January 1, and mature on July 1, 2023. The bonds are classified as AFS securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium a. Prepare a bond amortization schedule for 2020 and 2021 using the effective interest method. Note: Round each amount entered into the schedule to the nearest whole dollar. 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 adjust the investment to fair value. The fair value of the bonds at December 31, 2020, was $105,300. Note: List multiple debits or credits (when applicable) in alphabetical order.Note: Round each amount to the nearest whole dollar. e. Record the receipt of…arrow_forwardOn December 31, 2019, Wintergreen, Inc, issued $150,000 of 7 percent, 10-year bonds at a price of 93.25. Wintergreen received $139,875 when it issued the bonds (or $150,000 x .9325). After recording the related entry, Bonds Payable had a balance of $150,000 and Discounts on Bonds Payable had a balance of $10,125. Wintergreen uses the straight-line bond amortization method. The first semiannual interest payment was made on June 30, 2020. Complete the necessary journal entry for June 30, 2020, by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.arrow_forward
- On July 1, 2020, West Company purchased for cash, three $10,000 bonds of North Corporation at a market rate of 4%. 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 $33,200. 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. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).arrow_forwardSheridan Company purchased $1750000 of 10% bonds of Scott Company on January 1, 2021, paying $1645434. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $104566 provides an effective yield of 11%. Sheridan Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2021, Sheridan Company should report interest revenue from the Scott Company bonds of: $175000. O $185457. O $181163. O $180998.arrow_forwardAn investor company purchased $427,000 of 8% bonds from the investee company on January 1, 2020, with interest payable on December 31. The bonds were classified as Available-for-Sale. The bonds sold for $706,390. Using the effective-interest method, the investor company revised the Available-for-Sale Debt Securities account on December 31, 2020 and December 31, 2021 by the amortized discount/premium of $6,470. and $8,200, respectively. At December 31, 2020, the fair value of the investee company bonds was $912,000. At December 31, 2021, the fair value of the investee company bonds was $843,000. What is the amount of unrealized holding gain/loss related to this investment in 2021? (Very important: Just enter the amount. DO NOT put a plus or minus sign in front of the amount.)arrow_forward
- On January 2, 2018, Crane Corporation, a small company that follows ASPE, issued $1.8 million of 11% bonds at 98 due on December 31, 2027. Legal and other costs of $180,000 were incurred in connection with the issue. Crane has a policy of capitalizing and amortizing the legal and other costs incurred by including them with the bond recorded at the date of issuance. Interest on the bonds is payable each December 31. The $180,000 of issuance costs are being deferred and amortized on a straight-line basis over the 10- year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (The straight-line method is not materially different in its effect compared with the effective interest method.) The bonds are callable at 103 (that is, at 103% of their face amount), and on January 2, 2023, the company called a face amount of $1,000,000 of the bonds and retired them. (a) Ignoring income taxes, calculate the amount of loss, if any, that the…arrow_forwardOn January 1, 2023, Liu Corporation paid $242,952 to acquire bonds of Singh Investment Corp with a par value of $241,000. The annual contract rate on the bonds is 6.5% and interest is paid semiannually on June 30 and December 31. The bonds mature after three years. The market rate of Interest was 6.2%. Liu Corporation intends to hold the bonds until maturity. Required: 1. Prepare an amortization schedule for the investment showing only 2023. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Enter all the amounts as positive values.) Cash Period Interest Period Ending Premium Amort. Interest Received Income Unamortized Premium Carrying Value Jan. 1/23 June 30/23 Dec. 31/23arrow_forwardOn 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.arrow_forward
- On August 1, 2018, Dambro Company acquired 1,200, $1,000, 9% bonds at 97 plus accrued interest. The bonds were dated May 1, 2018, and mature on April 30, 2024, with interest paid each October 31 and April 30. The bonds will be added to Dambro’s available-for-sale portfolio. The preferred entry to record the purchase of the bonds on August 1, 2018 is a. Debt Investments 1,191,000 Cash 1,191,000 b. Debt Investments 1,164,000 Interest Receivable 27,000 Cash 1,191,000 c. Debt Investments 1,164,000 Interest Revenue 27,000 Cash 1,191,000 d. Debt Investments 1,200,000 Interest Revenue 27,000 Discount on Debt Investments…arrow_forwardKrause Corporation issued $2,600,000, 10-year, 5% bonds for $2,470,000 on January 1, 2019. Interest is paid semiannually on January 1 and July 1. The corporation uses the straight-line method of amortization. Krause's fiscal year ends on December 31. The amount of discount amortization on July 1, 2019, would be A. $130,000 B. $13,000 C. $6,500 D. $130,000arrow_forwardOn 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.arrow_forward
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