On July 1, 2015, Velor Inc. acquired the following bonds, which Velor Inc. intended to hold to
Question:
On July 1, 2015, Velor Inc. acquired the following bonds, which Velor Inc. intended to hold to maturity:
BOND | Price | Face Amount Purchased | Face Amount Purchased |
Zcom Inc. 12% bonds, maturity date December 31, 2020 | 102 | $440,000 | |
Global Filter Corp. 6% bonds, maturity date, December 31, 2022 | 91 | 500,000 |
Both bonds pay interest annually on December 31. Premium and discount will be amortized on a straight-line basis. Assume Velor Inc. follows ASPE. Please make sure your final answer(s) are accurate to 2 decimal places.
1) Prepare the following journal entries to be made on their correct dates in 2015:
- The acquisition of the investments. Accrued interest was paid on the acquisition dates, as appropriate.
- The receipt of interest and the amortization of the premium or discount for Zcom Inc.
- The receipt of interest and the amortization of the premium or discount for Global Filter Corp.
Enter the transaction letter as the description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (i.e., January 15 would be 15/Jan).
2) Show the accounts and the corresponding amounts that would be reported in the 2015 income statement related to these investments
3) Calculate the balance for each investment account on the financial statement date.
2015
Fundamental Accounting Principles
ISBN: 978-0077862275
22nd edition
Authors: John Wild, Ken Shaw, Barbara Chiappetta