On January 1, a company purchased 3%, 20-year corporate bonds for $69,057,808 as an investment. The...

On January 1, a company purchased 3%, 20-year corporate bonds for $69,057,808 as an investment. The bonds have a face amount of $80 million and are priced to yield 4%. Interest is paid semiannually. Prepare a partial amortization table at the effective interest rate on June 30 and December 31. Prepare the journal entries necessary to record revenue at the effective interest rate on June 30 and December 31.

Period-End	Cash Interest Received	Bond Interest Revenue	Discount Amortization	Carrying Value
January 1				$69,057,808
June 30
December 31

Solutions

Expert Solution

Prepare a partial amortization table at the effective interest rate on June 30 and December 31

Period End	Cash interest received	Bond interest revenue	Discount amortization	Carrying value
January 1				69057808
June 30	1200000	1381156	181156	69238964
Dec 31	1200000	1384779	184779	69423743

Journal entry

Date	account and explanation	Debit	credit
June 30	Cash	1200000
	Discount on bonds investment	181156
	Bond interest revenue		1381156
	(To record interest)

Dec 31	Cash	1200000
	Discount on bond investment	184779
	Bonds interest revenue		1384779
	(To record interest)

ekkarill92 answered 1 year ago

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