Accounting for debt investments Advance & Co. owns vast amounts of corporate bonds. Suppose Advance buys $1,100,000 of FermaCo bonds at face value on January 2, 2018. The FermaCo bonds pay interest at the annual rate of 3% on June 30 and December 31 and mature on December 31, 2037. Advance intends to hold the investment until maturity. Requirements 1. Journalize any required 2018 entries for the bond investment. 2. How much cash interest will Advance receive each year from FermaCo? 3. How much interest revenue will Advance report during 2018 on this bond investment?

Accounting for debt investments Advance & Co. owns vast amounts of corporate bonds. Suppose Advance buys $1,100,000 of FermaCo bonds at face value on January 2, 2018. The FermaCo bonds pay interest at the annual rate of 3% on June 30 and December 31 and mature on December 31, 2037. Advance intends to hold the investment until maturity. Requirements 1. Journalize any required 2018 entries for the bond investment. 2. How much cash interest will Advance receive each year from FermaCo? 3. How much interest revenue will Advance report during 2018 on this bond investment?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 5P: Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and...

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Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
E14-10 Bond Amortization Tables On January 1, 2019, Calvert Company issues 12%, $100,000 face value bonds for $103,545.91, a price to yield 10%. The bonds mature on December 31, 2020. Interest is paid semiannually on June 30 and December 31. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare the journal entries to record the interest payments on June 30, 2019, and December 31, 2019, using both methods.
On January 31, 2024, B Corp. issued $650,000 face value, 12% bonds for $650,000 cash. The bonds are dated December 31, 2023, and mature on December 31, 2033. Interest will be paid semiannually on June 30 and December 31. What amount of accrued interest payable should B report in its September 30, 2024, balance sheet? a. $58,500 b. $ 39,000 c. $ 19,500 d. $52,000
Accounting for debt investments League Up & Co. owns vast amounts of corporate bonds. Suppose League Up buys $900,000 of CocoCorp bonds at face value on January 2, 2018. The CocoCorp bonds pay interest at the annual rate of 8% on June 30 and December 31 and mature on December 31, 2022. League Up intends to hold the investment until maturity. Requirements How would the bond investment be classified on League up’s December 31, 2018, balance sheet? Journalize the following on League Up’s books: a. Receipt of final interest payment, on December 31, 2022. b. Disposition of the investment at maturity on December 31, 2022.
Suppose Donahue Brothers purchases $750,000 of 6.5% annual bonds of McPhee Corporation at face value on January 1, 2024. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2033 Donahue intends to hold the McPhee bond investment until maturity Read the requirements Requirement 1. Journalize Donahue Brothers' transactions related to the bonds for 2024 (Record debits first, then credits Select the explanation on the last line of the journal entry table) Begin by journalizing Donahue Brothers' investment on January 1, 2024 Date Accounts and Explanation 2024 Jan 1 GETD Next, journalize the receipt of cash interest on June 30, 2024 Accounts and Explanation Date 2024 Jun 30 Journalize the receipt of cash interest on December 31, 2024 Accounts and Explanation Date 2024 Dec 31 Debit Accounts and Explanation Debit Debit Credit Debit Credit Requirement 2. Journalize the entry required on the McPhee bonds maturity date (Assume the last interest paymen has…
Qa.7. On June 30, 2025, Daniel Jackson Company issued $3,990,000.00 face value of 14%, 20-year bonds at $4,590,340.00, a yield of 12%. Jackson uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and -December 31. Prepare the journal entries to record the following transactions: 1.The issuance of the bonds on June 30, 2025. 2.The payment of interest and the amortization of the premium on December 31, 2025. 3.The payment of interest and the amortization of the premium on June 30, 2026. 4.The payment of interest and the amortization of the premium on December 31, 2026.
Requirement 3. Prepare a comprehensive income statement for Thyme Investments for year ended December 31, 2018. Assume net income was $320,000. (Use a minus sign or parentheses to enter a loss.) 2018 Jan. 5 Purchased Vince Company's $525,000 bond at face value. Thyme classified the investment as available-for-sale. The Vince bond pays interest at the annual rate of 6% on June 30 and December 31 and matures on December 31, 2021 Management's intent is to keep the bonds for several years . June 30 Received an interest payment from Vince Dec.31 Received an interest payment from Vince. Dec.31 Adjusted the investment to its current market value of $518.500 .
E14-2 Recording Bond Issue and Interest Payments Synergy Corporation is authorized to issue $1,200,000 of 8% bonds. Interest on the bonds is payable semiannually; the bonds are dated January 1, 2019, and are due December 31, 2023. Required: Prepare the journal entries to record the following: a. January 1, 2019 Sold the bonds at par b. June 30, 2019 First interest payment c. December 31, 2019 Second interest payment
Question. The Gorman Group issued $900,000 of 13% bonds on June 30, 2021, for $967,707. The bonds were dated on June 30 and mature on June 30, 2041 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semi-annually on December 31 and June 30. Required: 1. to 3. Prepare the journal entries to record their issuance by The Gorman Group on June 30, 2021, interest on December 31, 2021 and interest on June 30, 2022 (at the effective rate).
kindly answer part e, f and g The following transactions are taken from the records of the Elton Corporation. Prepare journal entries for the transactions for the following: a. Bonds payable with a par value of $800,000, carrying a stated interest rate of 9% payable semiannually on March 1 and September 1, were issued on June 1, 2014, at 102.5 plus accrued interest. The bonds are dated March 1, 2014 and mature on March 1, 2024. b. September 1 interest payment is made. (Bond premium amortization is recorded only at year end.) c. Year-end (December 31) accrued interest on bonds payable is recorded and the bond premium is amortized using the straight-line method. d. March 1 interest payment is made. e. Bonds with a par value of $350,000 are purchased at 101 plus accrued interest on August 1, 2015, and retired. (Bond premium amortization is recorded only at year end.) f. September 1 interest payment is made. g. Year-end (December 31) accrued interest on bonds payable is recorded and the…