Question

In: Accounting

On January 1, Year 1, Company C purchased 10 of the $10,000 face value, 10%, 2-year...

On January 1, Year 1, Company C purchased 10 of the $10,000 face value, 10%, 2-year bonds of Company D. The bonds mature on December 31, Year 2, and pay interest annually on December 31. Company C purchased the bonds to yield 12% and classified the bonds as held-to-maturity. The company's policy is to amortize the bonds' premium or discount according to the effective interest method. Information on present value factors is a as follows:

Present value of $1 at 10% for two periods

0.8264

Present value of $1 at 12% for two periods

0.7972

Present value of an annuity of $1 at 10% for two periods

1.7355

Present value of an annuity of $1 at 12% for two periods

1.6901

Enter the appropriate amounts in the designated cells below. Round all amounts to the nearest dollar. If no entry is necessary, enter a zero (0). Enter all amounts as positive values.

Item

Amount

1. The amount Company C paid for the bonds.

2. The amount of discount on the bonds on January 1, Year 1.

3. The amount of cash interest received by Company C during Year 1.

4. The amount of interest revenue recognized in Year 1 income statement.

5. The amount of the bonds' discount amortized in Year 1.

6. The carrying amount of the bonds presented in the December 31, Year 1, financial statements.

Solutions

Expert Solution

ANSWER

Enter the appropriate amounts in the designated cells below. Round all amounts to the nearest dollar. If no entry is necessary, enter a zero (0). Enter all amounts as positive values.

Item

Amount

1)The amount Company C paid for the bonds. (1000*1.6901+10000*0.7972) 9662
2)The amount of discount on the bonds on January 1, Year 1. (10000-9662) 338
3)The amount of cash interest received by Company C during Year 1. (10000*10%) 1000
4)The amount of interest revenue recognized in Year 1 income statement. (9662*12%) 1159
5)The amount of the bonds' discount amortized in Year 1. 159
6)The carrying amount of the bonds presented in the December 31, Year 1, financial statements. 9662+159 = 9821

_____________________________________________

If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.

*****************THANK YOU**************


Related Solutions

On January 1, 2019, Rodgers Company purchased $400,000 face value, 10%, 3-year bonds for $390,009.00, a...
On January 1, 2019, Rodgers Company purchased $400,000 face value, 10%, 3-year bonds for $390,009.00, a price that yields a 11% 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.
On January 1, 2021, Hoosier Company purchased $916,000 of 10% bonds at face value. The bond...
On January 1, 2021, Hoosier Company purchased $916,000 of 10% bonds at face value. The bond market value was $973,000 on December 31, 2021. Required: Prepare the appropriate journal entry on December 31, 2021, to properly value the bonds assuming the bonds are classified as: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Trading securities. Securities available-for-sale. Held-to-maturity securities
1)On January 1, 2020, Bramble Company purchased at face value, a $1210, 10% bond that pays...
1)On January 1, 2020, Bramble Company purchased at face value, a $1210, 10% bond that pays interest on January 1. Bramble Company has a calendar year end. The adjusting entry on December 31, 2020, is not required Cash 121    Interest Revenue 121 Interest Receivable 121     Debt Investments 121 Interest Receivable 121    Interest Revenue 121 2)Marigold Inc. has 5200 shares of 5%, $100 par value, cumulative preferred stock and 49200 shares of $1 par value common stock outstanding at December 31,...
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...
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.)
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1,...
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1, 2010. The proceeds received were $1.7 million. The discount was amortized on the straight-line basis over the 10-year term. The terms of the debenture stated that the debentures could be redeemed in full at any point before the maturity date, at a price of 105 of the principal. There wan no requirement for a sinking fund. On January 1, 2017, Dickinson inued a mortgage...
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1,...
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1, 2010. The proceeds received were $1.7 million. The discount was amortized on the straight-line basis over the 10-year term. The terms of the debenture stated that the debentures could be redeemed in full at any point before the maturity date, at a price of 105 of the principal. There was no requirement for a sinking fund. On January 1, 2017, Dickinson issued a mortgage...
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...
23. On January 1, 2019, Mancunian Corp. purchased 10% bonds, with a $200,000 face value, for...
23. On January 1, 2019, Mancunian Corp. purchased 10% bonds, with a $200,000 face value, for $218,492.52. This price implies an 8% yield to Mancunian. The bonds pay interest on December 31 of each year. Mancunian uses the effective-interest method and classifies the bonds as available for sale securities. The fair value of the bonds on December 31, 2019 equals $217,200. The fair value of the bonds on December 31, 2020 equals $208,340. Prepare the journal entries to: 1. Record...
On January 1, 2019, Arc Company issued a $10,000 face value bond that sold for 92.  The...
On January 1, 2019, Arc Company issued a $10,000 face value bond that sold for 92.  The bond had an eight-year term and with a coupon (stated) rate of 4% annual interest.  The company uses the straight-line method of amortization. 1.    The carrying value of the bond liability on January 1, 2019, would be... 2.      The amount of interest expense reported on the 2019 income statement would be... 3.      Interest expense reported on the income statement over the life of the bond would a.   increase...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT