Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $60,000 of 5%...

Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $60,000 of 5% bonds that pay interest on 1/1. They mature in 10 years and yield 6%. Max pays $55,584. On 12/31/20, the fair value of the bonds is $60,800. Assuming the bonds are classified as "Trading", prepare the journal entries for 1/1/20, 12/31/20, and 1/1/21. You may omit (leave out) the closing entries

Solutions

Expert Solution

Max's Company
Date	General journal	Debit	Credit
1/1/20	Investment in CarmCorp Bonds (Trading)	60,000
	Discount on bond investment (60000-55584)		4,416
	Cash		55,584
	*(To record purchase of bond.)*

12/31/20	Interest receivable (60000*5%)	3,000
	Discount on bond investment	335
	Interest revenue (55584*6%)		3,335
	*(To record accrue interest receivable)*

12/31/20	Fair value Adjustment - Trading	4,881
	Unrealized holding Gain on bond investment - NI [net income]		4,881
	*(To record Fair value Adjustment.) (60800-55919)*
	Amortized cost = 60000-(4416-335) = 55919

1/1/21	Cash	3,000
	Interest receivable (60000*5%)		3,000
	*(To record interest received.)*

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

2. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of...

2. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of 8% bonds that pay interest on 1/1. They mature in 5 years and yield 10%. Max pays $9,242. On 12/31/20, the fair market value of the bonds is $11,000. Assuming the bonds are classified as "Trading", prepare the journal entries for 1/1/20, 12/31/20, and 1/1/21. You may omit the closing journal entries. 3. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20...

1A. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of...

1A. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of 8% bonds that pay interest on 1/1. They mature in 5 years and yield 10%. Max pays $9,242. On 12/31/20, the fair market value of the bonds is $11,000. Assuming the bonds are classified as "Trading", prepare the journal entries for 1/1/20, 12/31/20, and 1/1/21. You may omit the closing journal entries. 1B. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20...

On 1/1/20, Your Company issued $250,000 of 6% bonds, dated 1/1/20. The bonds pay interest annually...

On 1/1/20, Your Company issued $250,000 of 6% bonds, dated 1/1/20. The bonds pay interest annually on December 31st. The yield is 8%. They mature in three years on 12/31/22. The bonds were issued for $237,115 Note: Be sure to show the date of each journal entry. The ‘right’ journal entry on the ‘wrong’ date is wrong. Prepare an amortization table for all three years. Prepare the journal entry for 1/1/20 Prepare the journal entry for 12/31/20

On January 1, 20x1, Smith Company issued $15,000,000 of 20-year, 5% bonds, with interest payable annually...

On January 1, 20x1, Smith Company issued $15,000,000 of 20-year, 5% bonds, with interest payable annually on December 31 of each year. The bonds were sold at an effective rate of 7% for $11,821,800. 22. What is the maturity value of the bond issue? 23. What is the coupon rate? 24. What is the yield? 25. This is a multi-part problem because the answers are dependent upon one another such that missing one part would likely result in missing...

. The Stylist Company issued 20-year bonds on January 1. The 10% bonds have a face...

. The Stylist Company issued 20-year bonds on January 1. The 10% bonds have a face value of $900,000 and pay interest every January 1 and July 1. The bonds were sold for $982,808 based on the market interest rate of 9%. Stylist uses the effective interest method to amortize bond discounts and premiums. On July 1 of the first year, Stylist should record which of the following journal entries when the interest is paid. (round to the nearest dollar)...

Exercise 14-5 Culver Company issued $516,000 of 10%, 20-year bonds on January 1, 2017, at 102....

Exercise 14-5 Culver Company issued $516,000 of 10%, 20-year bonds on January 1, 2017, at 102. Interest is payable semiannually on July 1 and January 1. Culver Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Prepare the journal entries to record the following. a) The issuance of the bonds. (b) The payment of interest and related amortization on July 1, 2017. (c) The accrual of interest and the related amortization...

PROBLEM 5: ON JANUARY 1, 2016 SMITH COMPANY ISSUED 8%, 20-YEAR BONDS PAYABLE WITH FACE VALUE...

PROBLEM 5: ON JANUARY 1, 2016 SMITH COMPANY ISSUED 8%, 20-YEAR BONDS PAYABLE WITH FACE VALUE OF $300,000. THE BONDS PAY INTEREST ON JUNE 30 AND DECEMBER 31. THE ISSUE PRICE OF THE BONDS IS 98. INSTRUCTIONS: JOURNALIZE THE FOLLOWING BOND TRANSACTIONS: A) ISSUANCE OF THE BONDS ON JANUARY 1, 2016 B) PAYMENT OF INTEREST AND AMORTIZATION ON JUNE 30, 2016

On September 1, 19X1, Simons Company sold and issued to Trammel Company $60,000, 5-year, 9% coupon...

On September 1, 19X1, Simons Company sold and issued to Trammel Company $60,000, 5-year, 9% coupon annual interest rate (payable semiannually) bonds for a price that would yield the market annual rate of interest of 8%. The bonds were dated July 1, 19X1, and interest is payable each June 30 and December 31. The accounting period for Simons ends on December 31. Required: Calculate the cash price at September 1,and record the journal entries for issuance and for the first...

On September 1, 19X1, Golf Company sold and issued to Youngblood Company $60,000, 5-year, 9% coupon...

On September 1, 19X1, Golf Company sold and issued to Youngblood Company $60,000, 5-year, 9% coupon annual interest rate (payable semiannually) bonds for a price that would yield the market annual rate of interest of 8%. The bonds were dated July 1, 19X1, and interest is payable each June 30 and December 31. The accounting period for Golf ends on December 31. Record the cash price at September 1, and the journal entries for issuance and the first 2 interest...

On June 1, 2017, Griffin Company issued $294,000 of 20-year, 7% bonds at 112. The bonds...

On June 1, 2017, Griffin Company issued $294,000 of 20-year, 7% bonds at 112. The bonds were dated June 1, 2017, and pay interest on June 1 and December 1. Griffin Company uses the straight-line method to amortize the discount or premium. Required: Assuming that the entry to amortize the discount or premium to date has been made, what is the carrying value of the bonds on December 31, 2023?

Subjects