Patton Company purchased $1,500,000 of 10% bonds of Scott Company on January 1, 2018, paying $1,410,375....

Patton Company purchased $1,500,000 of 10% bonds of Scott Company on January 1, 2018, paying $1,410,375. The bonds mature January 1, 2028; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity.

*USE T ACCOUNTS

On July 1, 2018, Patton Company should increase its Debt Investments account for the Scott Company bonds by?

For the year ended December 31, 2018, Patton Company should report interest revenue from the Scott Company bonds of?

Solutions

Expert Solution

Solution 1:

On July 1 2018, Patton Company should increase its Debt Investments account for the Scott Company bonds by = Amount of discount amortized

= Interest revenue - Interest received = ($1,410,375*11%*6/12) - ($1,500,000*10%*6/12) = $77,571 - $75,000 = $2,571

Solution 2:

Interest revenue on 31 december 2018 = ($1,410,375 + $2,571)*11%*6/12 = $77,712

For the year ended December 31, 2018, Patton Company should report interest revenue from the Scott Company bonds of = $77,571 + $77,712 = $155,283

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

On January 1, 2018, for $18.7 million, Cenotaph Company purchased 10% bonds, dated January 1, 2018,...

On January 1, 2018, for $18.7 million, Cenotaph Company purchased 10% bonds, dated January 1, 2018, with a face amount of $20.7 million. For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31 . Required: 1. Prepare the journal entry to record interest on June 30, 2018, using the effective interest method. 2. Prepare the journal entry to record interest on December 31, 2018, using the effective interest...

On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face...

On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face amount of $37 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the price of...

On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face...

On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face amount of $20 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1, 2018. 2. Prepare the journal entry to record the bond issuance by Bishop on January 1, 2018. 3. Prepare the...

On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face...

On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face amount of $19.6 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations to...

On January 1, 2018, Ras Alhd Corporation purchased 12% bonds dated January 1, 2018, with a...

On January 1, 2018, Ras Alhd Corporation purchased 12% bonds dated January 1, 2018, with a principal amount of OMR 120,000. The bonds mature in 2028 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. What is the price of the bonds at January 1, 2018 Select one: a. OMR 120,000 b. OMR 138,694 c. OMR 108,000 d. OMR 101,306

On January 1, 2018, Rare Bird Ltd. purchased 15% bonds dated January 1, 2018, with a...

On January 1, 2018, Rare Bird Ltd. purchased 15% bonds dated January 1, 2018, with a face amount of $28 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the price...

On January 1, 2018, Shirley Corporation purchased 12% bonds dated January 1, 2018, with a face...

On January 1, 2018, Shirley Corporation purchased 12% bonds dated January 1, 2018, with a face amount of $21 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 16%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the price of...

On May 1, 2014, Kymier Corp. purchased $1,500,000 of 12% bonds—with interest payable on January 1...

On May 1, 2014, Kymier Corp. purchased $1,500,000 of 12% bonds—with interest payable on January 1 and July 1—for $1,406,500 plus accrued interest. The bonds mature on January 1, 2024. Amortization is recorded when interest is received by the straight-line method (by months and rounded to the nearest dollar). (Assume bonds are available for sale.) Instructions: (a) Prepare the entry for May 1, 2018. (b) The bonds are sold on August 1, 2019 for $1,412,500 plus accrued interest. Prepare all...

On January 1, 2021, Wildcat Company purchased $93,000 of 10% bonds at discount.

On January 1, 2021, Wildcat Company purchased $93,000 of 10% bonds at discount. The market interest rate is 12%. The bonds are to be held-to-maturity, and will last for 3 years. The bonds pay interest semiannually on January 1 and July 1.Required: (1.) Prepare the appropriate journal entry to record the acquisition of the bonds. (2.) Record the first two interest payments.

On January 1, 2018, King Co. issued 10% bonds dated January 1, 2018, with a face...

On January 1, 2018, King Co. issued 10% bonds dated January 1, 2018, with a face amount of $19.2 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations to...

Subjects