Question
In: Accounting
On January 1, Year 1 Alcorn Corporation purchased $95,000 of 9% bonds at face value. The...
On January 1, Year 1 Alcorn Corporation purchased $95,000 of 9% bonds at face value. The bonds are classified as a held-to-maturity investment. The bonds pay interest semiannually on January 1 and July 1. On December 31, Year 1, the fair value of the bonds is $98,000. Alcorn's fiscal year ends on December 31.
Required:
1. Prepare the journal entries to record the acquisition of the bonds and the first two interest payments. Include any year-end adjusting entries.
2. If the bonds were classified as an available for sale security, what additional adjusting entry would be made on December 31?
Solutions
Expert Solution
1)
investments held for maturity
in this case no need to adjust the investments to fair value
| Date | Accounts Name | Debit | Credit |
| 1-Jan | marketable securities or ( investment in bonds ) | 95000 | |
| cash | 95000 | ||
| 1-Jul | cash ( 95000 * 9% * (6/12) | 4275 | |
| interest revenue | 4275 | ||
| 31-Dec | interest accrued ` | 4275 | |
| interest revenue | 4275 | ||
| 1-Jan | cash | 4275 | |
| interest accrued | 4275 |
problem - 2
investments are needs to adjust to fair value if they are classified as available foe sale
Adjusting entry
| Date | Accounts Name | Debit | Credit |
| 31- dec`` | marketable securities ( 98000 - 95000) | 3000 | |
| unrealized gain on marketable securities | 3000 |
ekkarill92 answered 2 years agoRelated Solutions
a. On January 1, 2017, Buffalo Corporation purchased 333 of the $1,000 face value, 9%, 10-year...
a. On January 1, 2017, Buffalo Corporation purchased 333 of the
$1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds
mature on January 1, 2027, and pay interest annually beginning
January 1, 2018. Buffalo purchased the bonds to yield 11%. How much
did Buffalo pay for the bonds?
Buffalo must pay for the bonds = ?
b. Buffalo Corporation purchased a special tractor on December
31, 2017. The purchase agreement stipulated that Buffalo should pay
$20,180 at the...
January 1, 2018: Nexxon corporation issued 20 year, 9% bonds with a face value of $2,000,0000....
January 1, 2018: Nexxon corporation issued 20 year, 9% bonds
with a face value of $2,000,0000. the bonds were sold to yield 10%.
Interest is payable semi-annually on january 1 and July 1.
Effective rate amortization is to be used.
1. what is the issue price of the bonds?
2. Using EXCEL, prepare an amortization table for the entire
bond term.
3. Record the bond issuance on 1/1/18
4. assume the company prepares financial statements
semi-annually on June 30 and...
On January 1, 2017, AJ Corporation purchased bonds with a face value of $300,000 for $308,373.53....
On January 1, 2017, AJ Corporation purchased bonds with a
face value of $300,000 for $308,373.53. The bonds are due June 30,
2020, carry a 13% stated interest rate, and were purchased to yield
12%. Interest is payable semiannually on June 30 and December 31.
On March 31, 2018, in contemplation of a major acquisition, the
company sold one-half the bonds for $159,500 including accrued
interest; the remainder were held until maturity.
Prepare an investment interest income and bond premium...
On January 1, 2017, AJ Corporation purchased bonds with a face value of $300,000 for $308,373.53....
On January 1, 2017, AJ Corporation purchased bonds with a face
value of $300,000 for $308,373.53. The bonds are due June 30, 2020,
carry a 13% stated interest rate, and were purchased to yield 12%.
Interest is payable semiannually on June 30 and December 31. On
March 31, 2018, in contemplation of a major acquisition, the
company sold one-half the bonds for $159,500 including accrued
interest; the remainder were held until maturity.
Prepare an investment interest income and bond premium...
On January 1, 2020, Vaughn Corporation purchased 311 of the $1,000 face value, 11%, 10-year bonds...
On January 1, 2020, Vaughn Corporation purchased 311 of the
$1,000 face value, 11%, 10-year bonds of Walters Inc. The bonds
mature on January 1, 2030, and pay interest annually beginning
January 1, 2021. Vaughn purchased the bonds to yield 11%. How much
did Vaughn pay for the bonds? (Round factor values to 5 decimal
places, e.g. 1.25124 and final answer to 0 decimal places, e.g.
458,581.)
On January 1 of this year, Victor Corporation sold bonds with a face value of $1,560,000...
On January 1 of this year, Victor Corporation sold bonds with a
face value of $1,560,000 and a coupon rate of 10 percent. The bonds
mature in four years and pay interest semiannually every June 30
and December 31. Victor uses the straight-line amortization method
and also uses a premium account. Assume an annual market rate of
interest of 8 percent.
1. Prepare the journal entry to record the
issuance of the bonds.
2. Prepare the journal entry to record...
On January 1 of this year, Victor Corporation sold bonds with a face value of $1,560,000...
On January 1 of this year, Victor Corporation sold bonds with a
face value of $1,560,000 and a coupon rate of 10 percent. The bonds
mature in four years and pay interest semiannually every June 30
and December 31. Victor uses the straight-line amortization method
and also uses a premium account. Assume an annual market rate of
interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of
$1) (Use the appropriate factor(s) from the...
On January 1, Year 1, Hanover Corporation issued bonds with a $56,500 face value
On January 1, Year 1, Hanover Corporation issued bonds with a $56,500 face value, a stated rate of interest of 9%, and a 5-year term to maturity. The bonds were issued at 99. Hanover uses the straight-line method to amortize bond discounts and premiums. Interest is payable in cash on December 31 each year.
The journal entry used to record the issuance of the bond and the receipt of cash would be: (Round your answer to the nearest whole dollar...
On January 1, Year One, the Pulaski Corporation issues bonds with a face value of $1...
On January 1, Year One, the Pulaski Corporation issues bonds
with a face value of $1 million. These bonds come due in twenty
years and pay an annual stated interest rate (each December 31) of
5 percent. An investor offers to buy the entire group of bonds for
an amount that will yield an effective interest rate of 10 percent
per year. Company officials negotiate and are able to reduce the
effective rate by 2 percent to 8 percent per...
On January 1, 2018, Ellison Co. issued 9 year bonds with a face value of $250,000,000...
On January 1, 2018, Ellison Co. issued 9 year bonds with a face
value of $250,000,000 and a stated interest rate of 7.5%, payable
semiannually on July 1 and January 1. The bonds were sold to yield
8%.
a. The issue price of the bonds is
b. Record the issuance on January 1, 2018.
c. Prepare the journal entries for the interest expense and
payments for 2018, 2019, 2020, 2021 and 2022.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You must evaluate a proposal to buy a new milling machine. The base price is $175,000,...
- “Triangle Guessing” game in Python The program accepts the lengths of three (3) sides of a...
- THIS PROGRAM HAS TO BE WRITTEN IN C Single function to perform the parity computation on...
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
ADVERTISEMENT