FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- On January 1, 2025, Sheffield Company purchased $410,000, 8% bonds of Aguirre Co, for $378,339. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2030. Sheffield Company uses the effective-interest method to amortize discount or premium. On January 1, 2027, Sheffield Company sold the bonds for $380,070 after receiving interest to meet its liquidity needs.arrow_forwardOn January 1, 2020, Sheridan Company sold 9% bonds with a face value of $2100000. The bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $2274700 to yield 7%. Using the effective-interest method of amortization, interest expense for 2020 is $158709. $189000. $159179. $147000.arrow_forwardCotton Candy Company purchased $1,500,000 of 10% bonds of Caramel Company on January 1, 2024, paying $1,410,375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. For the year ended December 31, 2024, Cotton Candy Companys income statement will report interest revenue from the Caramel Company bonds ofarrow_forward
- On January 1, 2024, Morrison Inc., a public company, purchased $600,000 of Pearl Corporation's five-year, 4% bonds for $627,660 when the market interest rate was 3%. Interest is received semi-annually on July 1 and January 1. Morrison's year end is December 31. Morrison intends to hold Pearl's bonds until January 1, 2029, the date the bonds mature. The bonds' fair value on December 31, 2024, was $620,000. Instructions Record the purchase of the bonds on January 1, 2024. Prepare the entry to record the receipt of interest on July 1, 2024. Prepare the adjusting entry required at December 31, 2024. Show the financial presentation of the bonds for Morrison on December 31, 2024. Prepare the entry to record the receipt of interest on January 1, 2025. Prepare the entry to record the receipt on maturity of the bonds on January 1, 2029. Assume the entry to record the last interest payment has been recorded.arrow_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. d. Record the receipt of interest on January 1, 2021. e. Record the sale of all of the bonds on January 2, 2021, for $99,600. 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.arrow_forwardJSM Ltd. sold $6,010,000 of 8% bonds, which were dated March 1, 2023, on June 1, 2023. The bonds paid interest on September 1 and March 1 of each year. The bonds' maturity date was March 1, 2033, and the bonds were issued to yield 10%. JSM's fiscal year-end was February 28, and the company followed IFRS. On June 1, 2024, JSM bought back $2,010,000 worth of bonds for $1,910,000 plus accrued interest. (a) Your Answer Correct Answer (Used) Using 1. a financial calculator, or 2. Excel function PV, calculate the issue price of the bonds and prepare the entry for the issuance of the bonds. Hint: Use the account Interest Expense in your entry). (Round answer to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) (b) Account Titles and Explanation Cash Interest Expense Bonds…arrow_forward
- Perez Company sold five-year, 8% bonds on October 1, 2021. The face amount of the bonds was $100,000, while the issue price was $102,000. Interest is payable on April 1 of each year. The fiscal year of Perez Company ends on December 31. How much interest expense will Perez Company report in its December 31, 2021, income statement (assume straight-line amortization)? A. $1900. B. $2,000. C. $1,778. D. $2,040.arrow_forwardOn January 1, 2019, Rodgers Company purchased $200,000 face value, 10%, 3-year bonds for $190,165.35, a price that yields a 12% effective annual interest rate. The bonds pay interest semiannually on June 30 and December 31. Required: 1. Record the purchase of the bonds. 2. Prepare an investment interest income and discount amortization schedule using the effective interest method. 3. Record the receipts of interest on June 30, 2019, and June 30, 2021.arrow_forwardOn January 1, 2022, Huff Co. sold P1,000,000 of its 10% bonds for P885,296 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Huff report as interest expense for the six months ended June 30, 2022? a.) P44,266 b.) P50,000 c.) P53,118 d.) P60,000arrow_forward
- On January 1, 2019, Kelly Corporation acquired bonds with a face value of $400,000 for $386,808.18, a price that yields a 9% effective annual interest rate. The bonds carry a 8% stated rate of interest, pay interest semiannually on June 30 and December 31, are due December 31, 2022, and are being held to maturity. Required: Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the: 1. straight-line method of amortization 2. effective interest method of amortizationarrow_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. (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020arrow_forwardFlounder Corp. purchased $276,000 of five-year, 7% Hydrocor bonds at 99 on June 30, 2024. Flounder Corp. purchased the bonds to earn interest. Interest is paid semi-annually each June 30 and December 31. The semi-annual amortization amount for the first interest period is $234 determined using the effective-interest method. At December 31, 2024, the bonds were trading at 98. Prepare the required journal entries on June 30 and December 31, 2024. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles (To record receipt of interest.) > (To record fair value adjustment.) Debit Creditarrow_forward
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